SMSF - Related party tenants? ATO announces SMSF rent relief measures

HomeInsights

Businesses have been asking landlords for rent relief, but the SIS Act rules that govern a SMSF do not allow for this. Charging a related party a price that is less than market value usually results in a contravention from the SMSF auditor, which is reported to the ATO.


This has obviously presented an issue for many clients who rent from their SMSF where they have seen a significant income impact or closure of their business as a result of COVID-19, to the point that their business can no longer afford to pay their rent. 


We contacted our SMSF auditor who advised that unless they received clear direction by the ATO, it would not be permitted. So of course, we went to the ATO SMSF team! In a discussion with the ATO over a week ago they agreed that a rent reduction that is ‘commercial’ given the circumstances should be supported and that the ATO would release guidance. The wait is over, and here it is!


What have the ATO said?

The ATO has announced they will be taking no action in situations where an SMSF, which owns a business premise that is being leased to a related party, reduces the rent for the 2019/20 and 2020/21 financial years. 

What does this mean?

If your business has suffered as a result of COVID-19 you can provide your business rent reduction. But you should aim to ensure the agreement you have with yourself is reflective of what would be commercial.

What documentation is required?

At this stage we do not have clear guidance but I would suggest a letter from your business to your SMSF, requesting rent reduction is required at the very least. But we will update this blog as further information becomes available. 

What now?

Please don't hesitate to contact us to assist with how you can commercially reduce your rent with your SMSF, and ensure we still keep the SMSF Auditor happy!

SMART Business Solutions is here to help you navigate the tax regulations governing travel costs associated with your rental property activities.
 

Want to grow your business & improve cash flow?

You need SMART solutions for YOUR business, not just annual tax compliance! Get the SMART team working with you. Call SMART Business Solutions today on 03 5911 7000 or reception@smartbusinesssolutions.com.au.

 

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