Can Self-Managed Super Fund (SMSF) landlords provide rent reduction to a related party without breaching the SIS Act due to COVID-19?
The ATO have confirmed that SMSFs can provide ‘a temporary rent reduction’ to tenants, including a tenant:
- who is a related party or related trust
- where a member, relative or a member or related party/trust has an underlying economic interest in the tenant.
Although this would normally trigger a range of SIS Act compliance breaches, the ATO has indicated that it will not take compliance action for either the 2020 or 2021 financial years.
As a result, an SMSF can provide a temporary rent reduction immediately without fear of the ATO taking adverse action.
What do I need to provide if I do decide to give rent relief to my related party?
The ATO reduction concession is very broad, it is important not to abuse this. The auditor of the fund would expect a similar approach taken by arm’s length landlords. We would expect the following to be documented;
- Amendment to the lease agreement,
- Comparative rent relief being offered by arm’s length landlords and
- A letter from the tenant to the landlord outlying the above
Need help? Call one of our Superannuation Accountants on 5437 9900.