COVID-Related Support for SMSFs

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 contraventions of the super laws. You may also have been stranded overseas because of travel bans, which can affect your fund’s residency status.

In recognition of these issues, the ATO is offering support and relief to SMSF trustees for the 2019–20, 2020–21 and 2021–22 income years. You must properly document the relief and provide your approved SMSF auditor with evidence to support it for the purposes of the annual SMSF audit

Rental Relief

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 contraventions, as long as the relief is provided on comparable terms to relief offered by other landlords to unrelated tenants in similar circumstances
• If rent was deferred, relief granted by the ATO will 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 for rental relief need to be properly documented, together with the reasons for those changes. If this is the case, contacting our accountant in Melbourne is highly recommended, as a formal variation of the lease 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 at 30 June of an income year, you are required to 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
• Your approved SMSF auditor will not need to report any contravention of the in-house asset rules to the ATO

Loan Repayment Relief

If your fund has offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19, the ATO will not take any compliance action and your approved SMSF auditor need not report any contravention of the super laws provided:

• The relief is offered on commercial terms
• The changes to the loan agreement are properly documented.

Other Relief

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, and the lender has offered loan repayment relief to the fund due to the financial impacts of COVID-19.

Please contact our business accountants in Melbourne if you would like more information about the forms of relief offered by the ATO. We can also assist with other SMSF and business taxation matters through our tailored business taxation services.