The ATO has issued a formal Legislative Instrument that covers in-house asset issues where a self-managed superannuation fund (SMSF) provides rent relief to a related party (Self Managed Superannuation Funds (COVID 19 Rental income deferrals – In house Asset Exclusion) Determination 2020 – Self Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination 2020 (legislation.gov.au)).
The determination provides that rent deferred during the 2019-20 and 2020-21 financial years by an SMSF, or a company or unit trust in which an SMSF holds an interest, is not an in-house asset where the related party tenant is financially affected by COVID-19.
The determination applies for the year in which the deferral was made and any future income years.
Without the determination, the rent deferred could be an in-house asset of the SMSF and result in compliance issues if the value of all in-house assets of that SMSF exceeded 5% of the assets of the SMSF.
It is still important for SMSFs to ensure that any rent relief provided to related parties is on normal arm’s length terms, and properly documented. This is discussed further in our earlier publications, including What SMSFs must do to keep their auditors happy when they have provided COVID-19 relief to related parties and ATO confirms auditors must review and report on SMSFs providing COVID-19 rent relief to related parties.
Please contact a member of our superannuation team if you would like to discuss how this impacts your SMSF, or the SMSFs of your clients.