ATO, Property

Rent records vital to ATO no-action position

Rent relief SMSF

Trustees must document changes to property leases to be covered by the ATO no-action position on COVID-19 rent relief given by SMSF landlords.

Trustees owning property through a separate entity, now included in the ATO’s no-action position for SMSF landlords providing coronavirus rent relief to related-party tenants, must ensure any changes to leases are well documented, an SMSF legal expert has said.

Cooper Grace Ward partner Scott Hay-Bartlem welcomed the ATO’s decision to extend its no-action position on COVID-19 rent relief provided by SMSF landlords to include funds with an interest in entities owning rental property.

“The ATO’s original no-action position only applied where the SMSF was the landlord and owned the real estate directly,” Hay-Bartlem said in a blog post on the Cooper Grace Ward website.

“The ATO has now confirmed that its no-action position extends to where an entity such as a company or unit trust owns the real estate and leases it to a related-party tenant, and the SMSF owns an interest in the company or unit trust.”

Trustees of these funds needed to ensure any changes to a lease by their SMSF was appropriately documented and the fund’s rationale for those changes was included in the documentation, he added.

“It is very important that any changes to leases by SMSFs, and the reasons for them, are properly documented,” he noted.

“The ATO now specifically includes this in their no-action position, so the appropriate documentation is absolutely vital. The ATO acknowledges this can be ‘with a minute or a renewed lease agreement or other contemporaneous document’.”

He pointed out SMSF documentation should include an outline, with figures, of why the rent relief was appropriate, and a formal amendment to the existing lease terms.

“Failure to have the documentation could jeopardise accessing the ATO’s no-action position,” he said.

Earlier this week, Townsends Business & Corporate Lawyers superannuation online services managing solicitor Jeff Song said trustees thinking of selling units in a unit trust subject to an existing limited recourse borrowing arrangement as a result of the coronavirus pandemic must factor in the usual SMSF compliance issues.

Earlier this month, SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca said trustees allowing temporary rent relief to tenants impacted by the coronavirus must provide clear commercial justification for doing so.

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