Because of the financial impacts of COVID-19, you (in your role as trustee of an SMSF), or a related party of the fund, may provide or accept certain types of relief, which may give rise to infringements of the super laws. You may also have been stranded overseas because of travel bans, affecting your fund’s residency status.
In recognition of these issues, the ATO offers support and relief to SMSF trustees for the 2019–20, 2020–21 and 2021–22 income years. You must adequately document the relief and provide your approved SMSF auditor with evidence to support it for the annual SMSF audit.
Your fund (or a related party of your fund) may have offered rental relief to a tenant due to the financial impacts of COVID-19:
- if rent was reduced or waived, the ATO will not take any compliance action against your fund and/or ask your approved SMSF auditor to report any infringements, as long as the relief is provided on comparable terms to the relief offered by other landlords to unrelated tenants in similar circumstances; and
- If rent were deferred, relief granted by the ATO would ensure that the deferral does not cause a loan or investment to be an in-house asset of the fund in 2019-20, 2020-21 or 2021-22, and future financial years, provided certain conditions are met.
Temporary changes to a lease agreement to provide rental relief need to be appropriately documented, and the reasons for those changes.
Please get in touch with us as a formal lease variation may need to be executed.
In-house asset relief
If the value of your fund’s in-house assets exceeds 5% of the fund’s total assets as of 30 June of an income year, you must prepare and execute a written plan to get below 5% by the end of the following income year.
However, if you have not been able to execute the plan because of the financial impacts of COVID-19:
- the ATO will not take any compliance action against your fund; and
- your approved SMSF auditor will not need to report any infringement of the in-house asset rules to the ATO.
Loan repayment relief
Suppose your fund has offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19. In that case, the ATO will not take any compliance action, and your approved SMSF auditor needs report any infringement of the super laws provided:
- the relief is offered on commercial terms; and
- the changes to the loan agreement are adequately documented.
SMSF residency relief – may be available where your fund no longer satisfies the residency rules because you were stranded overseas for an extended period.
Loan repayment relief – may be available if your fund offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19.
LRBA relief may be available if your SMSF has a limited recourse borrowing arrangement (LRBA) in place with a related party lender. The lender has offered loan repayment relief to the fund due to the financial impacts of COVID-19.
Don’t hesitate to contact us if you want more information about the forms of relief offered by the ATO.
**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.