ATO announces extension of COVID-19 relief for SMSF trustees

SMSF

17 November 2021

With the continued financial impact that COVID-19 has on self-managed super funds (SMSFs) the Australian Tax Office (ATO) has confirmed that relief measures that were introduced in the 2021 financial year have been extended to the 2022 financial year.

As a trustee you may be feeling pressure to meet compliance requirements while you are also having to provide or accept certain types of relief. Usually this would give rise to a contravention under super laws, however with the ATO extending the relief measures to the 2022 financial year this gives trustees peace of mind that their SMSF will remain compliant. It is important to ensure that trustees properly document the relief and provide evidence to the SMSF auditor.

SMSF residency relief

The ATO understand that due to travel restrictions some trustees may be stranded overseas and unable to return to Australia. As a result, a trustee may be out of Australia for more than two years and this will affect the residency conditions of an SMSF for tax purposes. The ATO have extended the residency relief for trustees providing there are no other changes in residency conditions of the SMSF and they will not apply compliance action against any trustees impacted by the travel restrictions.

Rental relief

One key feature of the relief measures that the ATO provided last year was in relation to an SMSF, or a related non-geared company or unit trust, providing rental relief to a tenant in the form of a reduction, waiver or deferral of rent.

Usually this would give rise to a contravention as rent is not being paid on commercial terms, however the ATO have advised they will not take any compliance action against the SMSF provided:

  • The relief is offered on commercial terms due to the financial impact of COVID-19.

  • You document the agreement and provide this to the SMSF auditor.

The ATO have also advised that they plan to make a determination similar to Self-Managed Superannuation Fund (COVID-19 Rental Income Deferrals – In house Asset Exclusion) Determination 2020 in relation to rental relief in the 2022 financial year. This means that a rental deferral will not be treated as a loan or in-house asset in the current or future years.

Loan repayment relief

The ATO has extended relief measures for loan repayments where an SMSF provides loan relief to a related or unrelated party if repayments are not being made due to the financial impact of COVID-19.

The ATO have highlighted they will not take any compliance action against the fund if the relief is provided on commercial terms and the changes to the loan agreement are properly documented and agreed upon by both parties. This includes limited recourse borrowing arrangements with a related party if all conditions are met.

In-house asset relief

It is important for trustees to be aware of the super rules when their SMSF exceeds the five percent in house asset threshold.

The ATO have advised that if an SMSF has an in-house asset at 30 June 2021, the trustees must prepare a written plan to reduce the market value of the SMSF’s in house asset to below five percent by 30 June 2022.

Although this plan needs to be documented and in place, the ATO have advised they will not taken any compliance action against the SMSF where the plan has not been executed before 30 June 2022 due to the financial impact of COVID-19.

Please speak to your Findex adviser or get in touch with the SMSF Administration and Advisory team if you require more information or assistance.

Author: Asher Cribb

Asher is a Senior Accountant within the SMSF team based in the Grafton office and has been with Findex for over 2 years. Throughout his career, Asher has worked in both SMSF and Business Services helping clients meet their financial and personal goals. Asher proudly services clients on the East coast in Grafton and Yamba, as well as assisting with the Central West client base. He has a Bachelor of Business and is currently undertaking study through the SMSF Association.