The ATO has issued some public comments on its website to provide guidance (and some welcome ‘slack’) in relation to SMSF compliance issues that may be impacted by the current zombie apocalypse. The two key measures are outlined below.

Temporarily reducing rent payable by related parties

Many SMSFs own property that is rented by a related party and many of those related party tenants are struggling with cash flows, including paying the rent. Normally, if a SMSF charges a related party less than market-value rent (for example because of the financial impacts of COVID-19) it is a contravention of the super fund rules. The ATO’s comment is that it will not take action in relation to the 2019-20 and 2020-21 financial years if a SMSF gives a related party tenant a temporary rent reduction during this period.

In-house asset restrictions

Normally, if a super fund’s in-house assets (loans to or investments in related parties) are more than 5% of the fund’s total assets (for example due to the recent downturn in the share market) this would be a breach of the fund’s rules. The ATO has advised that if this occurs before 30 June 2020, funds still need to prepare a written plan before 30 June 2021 to reduce the market ratio of in-house assets to 5% or below, but it will not undertake any compliance activity if the plan was unable to be executed because the market hasn’t recovered, or if the plan became unnecessary because of an upturn.

As always, please feel free to call your friendly Halletts team member if you would like to discuss.

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