The economic impacts of the COVID-19 crisis are causing significant financial distress for many businesses and individuals.
If your SMSF has a property and a tenant in financial distress, you may be able to provide your tenant with rental relief under an agreed commercial arrangement. This may even be the case when the tenant is a related party or yourself.
Ordinarily, charging a tenant a price that is less than market value in an SMSF is usually a breach of superannuation laws. However, the ATO have provided guidance which allows SMSF landlords to provide for a reduction in or waiver of rent because of the financial impacts of the COVID-19.
For the 2019–20 and 2020–21 financial years, the ATO will not take action where an SMSF gives a tenant – who may also be a related party – a temporary rent reduction during this period.
What do you need to do?
There are some important things you should ensure are in place when you are providing a rent reduction to a tenant, especially when this is a related party.
These are extraordinary times and the ATO is providing this guidance to allow SMSF trustees to be flexible and agile.
If trustees act in good faith in implementing a reasonable and measured reduction in rent because of the impacts of COVID-19 they should not fall foul of the law.
How can we help?
If you need assistance providing rental relief or whether this is the right action for you and your specific circumstances, please feel free to email us on firstname.lastname@example.org, alternatively, you can refer to the SMSF Association’s trustee education platform, SMSF Connect.