COVID-19 ATO approach to SMSF rent reduction

The Australian Taxation Office has responded to widespread concerns from the superannuation industry on whether SMSF landlords providing rent relief to tenants – in particular related parties – due to the financial impacts of the novel coronavirus, is a contravention of the SIS Act.

The ATO’s response is as follows:

“Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of COVID-19 and we understand that you may wish to do so as well.

“Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant — who is also a related party — a temporary rent reduction during this period.”

Irrespective of the broadly accepting approach by the ATO, SMSF Trustees are still required to carefully document all decsisions of this nature to ensure there are no unintended breaches of SIS act. These potential breaches include:

  • The sole purpose test –– s 62 of SISA.
  • The in-house asset test –– pt 8 of SISA.
  • The prohibition against lending or providing financial assistance to a member or relative –– s 65 of SISA.
  • The arm’s length test –– s 109 of SISA.

To assist Trustees property document these matters Supernova provides draft templates whcih can be updates with your fund details

  • Tennant request letter to Landlord (Trustee)
  • Trustee Minutes documenting the approval
  • Trustee (Landlord) confirmation of arrangements

These can be found in our https://www.super-nova.com.au/forms2/