ATO Guidelines for SMSF’s granting commercial rent relief during COVID

Accounting & Bookkeeping | For Business | For Individuals | Self Managed Super Funds | Tax
August 10, 2020

The National Cabinet Mandatory Code of Conduct outlines a set of good faith principles for commercial tenancies for providing rent relief to tenants affected by COVID. What if that property is owned by a self-managed superannuation fund?

The Code of Conduct states landlords must provide rent relief if the tenant requests this and can show their turnover has reduced. The rent relief must be provided in proportion to the reduction in turnover, and 50% of the relief must be via a rent waiver and 50% as a rent deferral. However, charging rent at a price that is less than market value normally contravenes tax laws for SMSF owned properties so the announcement from ATO that it will not take action against SMSF at this time for providing rent relief is great news.

The ATO compliance approach for the 2019–20 and 2020–21 financial years is that they will not take action if an SMSF gives a tenant – even one who is also a related party – a temporary rent reduction, waiver or deferral because of the financial effects during this period. However, it’s important to note that the current ATO concession does not apply to other lease incentives or relief which are not a ‘temporary rent reduction’.

Substantial monetary penalties can be imposed by the ATO on the SMSF trustee for non-compliance with requirements of the fund to deal at arm’s length and to meet sole purpose test. It is important to document all reasons and arrangements properly and as such, we recommend that SMSF trustees consider seeking expert advice for each individual lease, property, and tenant circumstances.

We also recommend that you familiarise yourself with the following information and keep up to date with the latest ATO news/alerts:

If you are new to SMSF and thinking about setting up one, your first step is to speak with a financial advisor. We can then assist you with the set-up and administration required for your SMSF, including:

  • Preparation and lodgements of financial documents – SMSF financial accounts, income tax returns and business activity statements.
  • Arranging for the annual superannuation audit.
  • Ongoing advice on SMSF compliance matters – we monitor changes to superannuation legislation, taxation and employer obligations so you can make informed decisions.

If you require assistance in fulfilling your ATO related obligations, or otherwise – reach out to the team today.

Photo by Hidayat Abisena on Unsplash 

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