SMSF properties – ATO guidance on temporary rent relief

In some welcomed news for SMSFs which own business premises that are being leased to related parties, the ATO has confirmed they will not be taking compliance action where a SMSF provides rent relief to the tenant during 2019/2020 and 2020/2021.

The ATO’s provided some clarity this week in its response:

“Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of COVID-19 and we understand that you may wish to do so as well.

“Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant — who is also a related party — a temporary rent reduction during this period.”

Many of our business clients have been impacted by COVID-19, and this measure will hopefully provide them with some much needed cash-flow relief to allow them to focus on their businesses and wellbeing of their families.

What type of rent relief can be provided?

Rent relief can be in many forms and will be a matter for the SMSF trustees to negotiate with their respective tenants. SMSF trustees may wish to speak their accountants, finance providers, property manager or local real estate agents to understand what options are available. We assume it will be in the SMSF trustees’ best interests to retain their tenants.

Some examples include:

  • Providing a discount to the rent payable;
  • Providing a ‘rent holiday’ where no rent is payable for a period of time;
  • Payment of property related expenses (e.g. body corporate, rates etc) on behalf of the tenant.

Importantly, this is a temporary relief and the SMSF trustees and tenants should be prepared to resume the terms and conditions of the original lease agreement as soon as practical.

Documenting the rent relief

Where rent relief is provided, it is important that the SMSF trustee document this as it will be an amendment the current lease agreement. SMSF trustees should seek legal advice on how to do this to provide the necessary protections of any enforceable contract.

How can we help?

If you would like to know more about SMSFs or superannuation in general, please feel free to give Jason McLaren a call on 0418 800 363. Jason is a fully licenced Financial Planner and is able to provide you with personalised financial advice through his business, Flow Financial Planning.

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The information contained in this article is general in nature and does not take into account your personal situation or objectives. You should not act on this information in any way before seeking professional advice.