Inside or Outside Super? Strategies for High Net Worth Investors
In life, change is the constant. Our personal circumstances change, unexpected surprises crop up and our priorities shif...
UPDATED THURSDAY, 2 APRIL 2020
On Sunday, 29 March 2020 the Prime Minister’s office made the following announcement after the National Cabinet meeting:
As part of its work on helping businesses hibernate, National Cabinet agreed that short-term intervention is needed for commercial tenancies. Work on this has begun, but there is more to do, including for residential tenancies.
National Cabinet agreed to a moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of Coronavirus.
Commercial tenants, landlords and financial institutions are encouraged to sit down together to find a way through to ensure that businesses can survive and be there on the other side. As part of this, National Cabinet agreed to a common set of principles, endorsed by Treasurers, to underpin and govern intervention to aid commercial tenancies as follows:
National Cabinet will meet again on Monday, 30 March 2020
Source: https://www.pm.gov.au/media/national-cabinet-statement
The ATO has announced on 27/03/20 a range of measures in relation to SMSFs and COVID-19. Importantly the ATO have clarified the position for SMSFs and related party tenants as follows:
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.
Question
“My SMSF owns real property and wants to give my tenant – who is a related party – a reduction in rent because of the financial impacts of the COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the impacts of the COVID-19, will the ATO take action if I do this?"
Answer
"Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the 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.”
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.
Whether your tenant is related or not, if you wish to provide a form of rent relief to your tenant, please contact us to ensure that you can document this correctly.
Some things to think about:
The answers to these questions are going to change possibly on a daily or weekly basis, based on future Government announcements and on your tenant’s situation. You need to be flexible and ready to update your rent relief/deferral arrangements on an ongoing basis.
If you are in this situation, please call us to work through the issues and to ensure the correct documentation is put in place, allows your auditor to be satisfied that the temporary rent relief satisfies all of the above.
For other ATO information in relation to SMSFs and COVID-19, please click on the button below.
We're here to help.
As always we are only a phone call away, so if you are in this situation, please call our licenced Wealth Managers on (07) 4154 0458 to work through the issues and to ensure the correct documentation is put in place.
Particularly where the tenant is a related party it is not appropriate to just cease paying (or reduce) rent without the appropriate documentation in place.
Kylie Wright and Jes Wilkinson are both accredited SMSF Advisers and SMSF Specialist Advisers.
Our licenced Wealth Managers mobile details as follows.
Kylie Wright - 0409 510 554
Jes Wilkinson - 0437 791 434
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