Speaking in a recent webinar, SuperGuardian education manager Tim Miller explained that during the pandemic, SMSFs were provided with compliance relief which allowed them to offer related party rental relief, due to the financial impact of COVID-19.
“This applied in situations such business real property that was being leased by the SMSF out to a related party. That relief could be provided regardless of whether it was held directly by the fund or say a 13.22C unit trust.”
“That rental relief was obviously a form of deferral so it was that actually meant was that we were effectively creating a loan on the super fund account. That loan would normally be an in house asset but had that exemption that applied for the rental relief amount for that period from 2019 to 2022.”
Mr Miller said that means that any rental deferral that was provided in that period of time is not going to be an in house asset, nor will it be in the future.
However, with the relief ceasing on 30 June 2022, Mr Miller said SMSFs now need to start paying down those deferred amounts.
“We need to see that deferred amount paid down otherwise it could trigger a compliance issue as financial assistance to a related party. The auditor may lodge an ACR or at least raise it as an in-house asset issue.”
“So those deferral amounts should be starting to diminish based on the terms that were put in place when the deferral was initially granted to the related party.”
Mr Miller said it’s also important to remember that breaches of the 5 per cent in house asset limit are reportable now that we have moved beyond June 2022.
“You know need to act within 12 months to rectify those issues. So you will need to have your plan in place to reduce your in house assets below the 5 per cent and then follow through on that plan to ensure you don’t have an ongoing issue for the fund,” he warned.
