Extending Rent Relief to SMSF Related Parties

We know the ATO has sanctioned an SMSF negotiating rent relief with a related party tenant as a result of financial hardship during COVID-19.

But what about other scenarios?

Can a related unit trust meeting the requirements of a r13.22C unit trust provide COVID-19 rent relief to a related tenant?

Will an SMSF with a related party LRBA incur NALI by not meeting the conditions outlined under the safe harbour provisions of PCG 2016/5?

A significant amount of information has already been released by the Regulator about the impact of COVID-19 on the operations of an SMSF.

There are good reasons for how and why information is released.

Rather than approving a course of action that may create further SMSF compliance and/or tax issues, it’s best practice to remain silent until all the facts have been considered.

The ATO’s general approach is that they do not intend allocating compliance resources during the 2020 and 2021 financial years to SMSF related party situations that would normally receive rent relief or a waiver of rent as a result of COVID-19.

Commentary

Rental relief will be provided to tenants through a related investment company or unit trust that meets the requirements of 13.22C SISR.

While a related party LRBA falls under this umbrella and will be included in the exemption, it has Division 7A implications requiring further attention from the ATO. An update from the Regulator is due shortly on this matter.

The most critical aspect of COVID-19 rent relief is that all claims are genuine and can be supported by documentation. The ATO has stated that they will apply compliance resources where claims for rental relief are fraudulent.

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