Documentation critical with rental relief, SMSFs reminded
Some SMSFs are failing to properly document arrangements where they have provided rental relief or loan relief due to the pandemic, which may result in compliance issues for the fund, an SMSF auditor has warned.
Due to the financial effects of COVID-19, the ATO in 2020 announced that it would not undertake compliance action against SMSFs where trustees or a related party need to provide rental deferral relief to tenants.
This meant that if rental relief provided by an SMSF, or a related non-geared company or unit trust, to a tenant in the form of a reduction, waiver, or deferral gave rise to a contravention of the super laws, the ATO would not take any compliance action against the fund.
With COVID-19 continuing to have a significant financial effect on SMSFs during 2021, the ATO announced in September last year that it would extend compliance relief for SMSFs for the 2021-22 financial year.
Speaking to SMSF Adviser, ASF Audits’ Shelley Banton said she is coming across some instances where SMSFs have provided rental relief for related parties and haven’t provided documentation that is critical to meeting the requirements for the ATO’s compliance relief.
“If you’ve got a lease where you’ve got some problems where the rent can’t be paid from a related party, then you need to be able to make sure that any variation to that lease has been put in place as a result of COVID and that it’s been documented correctly and that it’s available at audit as well,” Ms Banton explained.
“We can’t [ignore] a situation where there’s no rent coming into the fund and there’s no associated documentation, and we’re seeing a bit of that coming through.”
Ms Banton said with the pandemic having impacted the 2019-20 and 2020-21 financial years and now, 2021-22 as well, it may be a case of “fatigue setting in” for some SMSF trustees.
“[However], it’s important that this relief continues to be documented very clearly between those relief parties and that all the information lines up so that we can see very clearly what it is at audit,” she cautioned.
Miranda Brownlee
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
