Speaking at the LightYear Docs Virtual Strategy Summit, ATO assistant commissioner, SMSF segment, Steve Keating announced that the ATO will soon be releasing a legislative instrument which will provide greater certainty regarding the compliance relief provided to SMSFs that have offered rent relief in response to COVID-19.
Mr Keating said the ATO already released some guidance which states that during the 2019–20 and 2020–21 financial years, the ATO would not be taking any action against an SMSF if it provides its tenant, even a related-party tenant, with temporary rental relief because of COVID-19.
“For us, we want to make sure that the temporary measures are well documented and clearly explained as to why they’ve done it,” Mr Keating said.
“If that’s the case, we won’t consider them to have had any breaches, particularly in regard to the in-house asset provisions that would otherwise apply if there has been rental relief provided to a related party. We’re currently in the process of releasing a legislative instrument giving certainty about that going forward.”
Mr Keating said it’s important that any SMSFs providing rent relief ensure that the lease agreement reflects the changes and they have documented the rationale for their decision-making.
The legislative instrument will also provide details on what SMSFs need to do to ensure that loan relief provided by a related party will not be non-arm’s length income (NALI).
“When we look at an LRBA, we understand that there may be opportunities to provide loan relief in particular, so we are looking at the LRBAs where there has been a loan by a related party, and if the relief has been negotiated as a result of COVID-19, it must have similar terms to a commercial bank,” he explained.
“As long as they’re offering similar terms with what’s available in the commercial arena, we won’t consider that NALI is applicable.”
So they should. I all my years of providing advice to SMSF Trustees as a qualified SSA, by far the biggest problem or challenge was the reluctance of the trustee’s accountant to comply, the trustee would go back to the accountant and ask is all this compliance stuff necessary? and 95% of the time the accountants would say “Don’t worry about it”. In my opinion, Trustees will do as little as possible unless forced to do something and follow the requirements. I found one accountant’s office had not made the trustee sign the trust deeds i.e. execute the trust, therefore the SMSF did not exist. I brought this to the attention of the chief accountant and I was barred from reviewing the trust deeds, so how can a specialist adviser be expected to fulfill their professional obligations to the trustees when this is going on?