In early August this year, the ATO released a draft legislative instrument (SPR 2020/D3) providing an in-house asset exclusion for SMSFs providing rental relief. The draft legislative instrument was released for industry consultation until the end of August.
In a recently published submission, the Self-Managed Independent Superannuation Funds Association (SISFA) said while it supports SPR 2020/D3 and the ATO for dealing with the issue, it believes a number of changes should be made to the instrument.
SISFA noted that paragraph 3 of SPR 2020/D3 only uses the word “acquires” and should also cover holding an in-house asset as well.
“This would avoid any argument that a rent deferral or waiver or reduction arrangement does not result in the SMSF acquiring an in-house asset,” the submission said.
The submission also stated that the deferral of rent can, but will not always, fall within the definition of financial accommodation.
“SISFA, therefore, considers that it is appropriate that the legislative instrument cover deferrals,” it said.
“However, SISFA is concerned that it could also be argued that a waiver or reduction of rent is financial accommodation and, therefore, an in-house asset.”
The submission therefore recommended that the legislative instrument be amended to include situations where there is a waiver or reduction of rent.
It also added that even if the ATO takes the view that paragraph 4(a) should not be expanded to cover a waiver or reduction of rent, then paragraph 4(b) should be so expanded.
“This is because of the potential application of regulation 13.22D(1)(l) requires the regulation 13.22 entities to transact on an arm’s-length basis and its potential to be triggered for a rental reduction or waiver,” it explained.
“While it could be said that this is not required as any reduction or waiver should be on arm’s-length terms anyway in the context of the current COVID-19 environment, in SISFA’s view, this would provide certainty to SMSF trustees offering reductions or waiver of rent.”
