In an online discussion with SMSF Association chief executive John Maroney, ATO assistant commissioner Dana Fleming addressed the issue of whether there would be any compliance action against SMSFs seeking commercial loan relief as a result of rental relief to tenants.
She said the ATO would soon be releasing a loan relief section on the Frequently Asked Questions page of its website.
“There’s no reason why we’re in a commercial environment that those types of concessions are being offered that SMSFs couldn’t consider similar concessions where they are having a related-party loan that is in place,” Ms Fleming said.
“If SMSFs need similar concessions that are available in the commercial environment to their related-party loans, we would highly recommend that you just document the reasons for the change, that it’s due to COVID-19 and that the reasons are clearly articulated as to how you’ve come to that new arrangement.
“Provided that’s being done, again, we want to reassure people that we won’t be taking any compliance activity for this financial year, again recognising that this situation is clearly going to tip over this financial year for next financial year, so 2021 as well.”
The ATO’s position on loan relief comes amid concerns from SMSF landlords with limited recourse borrowing arrangements (LRBAs) if there would be provisions to reduce loan payments.
However, SMSF Alliance practice principal David Busoli noted that SMSF landlords would be put in a difficult position if their bankers didn’t co-operate, and that the government’s mandatory code is “seriously deficient” in such situations.
In March, the ATO allayed concerns from trustees around whether charging a tenant rent that is less than market value contravenes the SIS Act, and whether the regulator would take action given the impacts of COVID-19.
“Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant — who is also a related party — a temporary rent reduction during this period,” the ATO said.
