Documentation critical for mitigating risks with rent relief
While the ATO has provided temporary relief for SMSFs that provide rent reductions to tenants, it is vital SMSFs obtain proper documentation around this to avoid compliance headaches later on, warns an SMSF expert.
Speaking in a recent webinar, Smarter SMSF chief executive Aaron Dunn said while the ATO has stated that it won’t take compliance action against a fund if a rent reduction or waiver was genuinely provided as a result of COVID-19, it is still important that SMSF clients properly document this.
“The ATO has acknowledged that they will not treat an asset as an in-house asset for current and future years where it can be demonstrated that that deferral of rent was due to COVID-19,” Mr Dunn explained.
“Where there are those temporary changes to the terms of the lease in response to COVID-19, it is important that the parties to the agreement document the changes.”
“This needs to be done on two parts. We can’t simply say that the parties are providing relief. This needs to be done by way of either an exchange of documents, so an exchange of letters through a new lease agreement or some other form of contemporaneous document.”
Mr Dunn said SMSF professionals and their clients will also need to minute those decisions and the arrangement.
“You also need to note what level of relief or waiver is being supplied or whether you’re complying with the Mandatory Code of Conduct for Commercial Leases,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.