The ATO has posted several frequently asked questions to assist individuals, businesses and self-managed superannuation funds during this period of economic uncertainty.

A common strategy over several years for businesses has been to acquire their commercial premises through their superannuation fund. One of the requirements of this arrangement is that rent is charged at market value, without fear or favour.

Many businesses have had to close their doors and are now wondering what options they have. The ATO has provided them a lifeline.

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 rent reduction or waiver 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 or waiver during this period.

Where there are temporary changes to the terms of the lease agreement in response to COVID-19 it is important that the parties to the agreement document the changes and the reasons for the change. This could be by way of a minute or a renewed lease agreement or other contemporaneous documentation.  

Source: Australian Taxation Office.

General Advice Warning: The information provided is of a general nature only and has been prepared without taking into account your financial objectives, situation or needs. These should be considered before you act on any information considered in any article and you may want to seek independent professional advice before making a decision.

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