The Australian Taxation Office (ATO) has extended to 30 June 22 the following administrative concessions for self-managed superannuation funds (SMSF) impacted by COVID-19 that were offered for the 2019-20 and 2020-21 financial years.
Temporary rent relief
The ATO will not take compliance action where an SMSF landlord (or a related non-geared company or unit trust) provides rental relief to a tenant in the form of a reduction, waiver or deferral. This is provided that the relief is offered on commercial terms (having regard to State and Territory COVID-19 support measures) due to the financial impacts of COVID-19, and the arrangement is properly documented. The ATO said it will also provide an in-house asset exemption for such rental deferrals by making a determination for 2021-22.
Loan repayment relief
The ATO will not take compliance action where loan repayment relief is provided by an SMSF to a related or unrelated party due to COVID-19. The relief must be offered on commercial terms with the changes to the loan agreement properly documented.
Limited Recourse Borrowing Arrangements (LRBA)
If an SMSF has an LRBA in place with a related party, and the lender offers loan repayment relief to the fund, the ATO will accept the parties are dealing with each other at arm’s length, and the arrangement does not give rise to non-arm’s length income. The relief must be offered on commercial terms (having regard to the terms of relief offered by commercial lenders for real estate investment loans).
In-house assets
If an SMSF exceeded the 5% in-house asset threshold at 30 June 2021 due to COVID-19, a rectification plan must be prepared and implemented by 30 June 2022. However, the ATO will not undertake compliance activity if the rectification plan cannot be executed by 30 June 2022 because the market has not recovered or it is unnecessary to implement the plan as the market had recovered.
SMSF residency test
If a trustee or director is stranded overseas due to COVID-19, causing them to be out of Australia for more than 2 years, the ATO will not apply compliance resources to that aspect of the SMSF residency condition.
The ATO said it has extended its administrative relief for SMSFs to 2021-22 in recognition that COVID-19 is continuing to have a significant financial effect on SMSFs, particularly in some states or territories where there are reoccurring and prolonged lockdown periods. The ATO also acknowledged that many countries have imposed travel bans and restrictions which may have resulted in some SMSF trustees becoming stranded overseas for long periods with potential implications for the fund’s residency status.
If you have any questions regarding any of the concessions, please give us a call on 03 5434 7600.