The Australian Taxation Office (ATO) announced the extension of support guidelines for trustees of self-managed super funds (SMSFs) to include the 2021-22 income years.
With the extension, the support and relief to SMSF trustees will now cover income years starting 2019-20 to 2021-22.
There are currently three support guidelines available: SMSF residency relief, rental relief, and loan repayment relief.
Under the SMSF residency relief, the ATO will not take any compliance action to determine whether the fund meets the residency test if the trustees who are stranded overseas due to the COVID-19 for more than two years.
According to the ATO, being overseas for an extended period could potentially impact whether the central management and control of the fund is ordinarily in Australia and whether the fund satisfies the “active member” test.
The no compliance action will be provided given that there are no other changes in the SMSF of your circumstances that would affect other residency conditions.
Guidelines for rental and loan repayment relief
Providing rental relief to tenants in the form of a reduction or waiver typically gives rise to reportable contraventions of the super laws, as the arrangement may not comply with the sole purpose test or contravene the prohibition on providing financial assistance to a member or a member's relative.
However, the ATO will not take any compliance action against the fund providing the rental relief provided that the following conditions are met:
- The relief is on commercial terms and is provided on comparable terms to relief offered by other landlords to unrelated tenants in similar circumstances
- The rental relief is in line with the state and territory COVID-19 support measures
- The relief is offered due to the financial impacts of COVID-19
- The arrangement is properly documented
Meanwhile, the ATO also offers rental relief set out in specific determinations passes in 2020 and 2022 to ensure that rental deferrals offered by the fund do not cause loan or investment to be an in-house asset of the fund.
The ATO will also not take any compliance action against SMSF that provided loan repayment relief due the financial impacts of the pandemic.
Ordinarily, repayment relief may give rise to contraventions of the super laws due to the similar reason for rental relief.
Meanwhile, if the SMSF has a limited recourse borrowing arrangement (LRBA) in place with a related party lender, the lender may have offered relief to the fund.
According to the ATO, if the relief is not offered on arm's length terms, this may ordinarily give rise to a contravention of the super laws.
However, the ATO will not issue any compliance action provided that the fund’s arrangement meets the following:
- The relief is offered on commercial terms, having regard to the terms of relief offered by commercial lenders for real estate investment loans
- The changes to the loan agreement are properly documented
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