ATO set to take firmer stance on admin penalties
The ATO is in the process of releasing a legislative instrument which will provide greater certainty around the compliance relief provided to SMSFs offering rent reductions to related parties and the documentation required.
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.”
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.