SMSF landlords granting rent relief to related tenants should understand the options available to them before determining what relief to offer, the Self-managed Independent Superannuation Funds Association (SISFA) has said.
Citing the ATO’s relaxed compliance approach towards SMSF landlords providing tenants with rent relief during the COVID-19 pandemic, SISFA director Phil Broderick pointed out, “The ATO is silent as to what relief can be offered and whether it can be offered to all tenants (even those not suffering a downturn).”
“This raises the question as to what relief can be offered.”
Broderick noted SMSF landlords granting relief to related tenants could take the ‘best practice’ option of matching the rent relief to that offered under statutory COVID-19 measures. They could also consider the relief granted in the rental market by arm’s length parties for similar properties as a benchmark for determining what to offer to tenants, he said.
As a final option, landlords could determine their own terms for the rent relief provided, but landlords considering this route should keep in mind it carried the greatest risk of being found to be a non-arm’s length dealing, he noted.
“It is also important, if a SMSF landlord offers rent relief, that the relief be formally documented (e.g. through a deed of variation of the lease or an exchange of letters). It is recommended that the reasons for offering the rent relief be recorded (e.g. in the formal documents or a trustee resolution),” he added.
Earlier this month, ASF head of technical Shelley Banton said any rent relief arrangements SMSF landlords have made in relation to the COVID-19 economic measures are likely to have to extend beyond 2020.
In April, the ATO updated its auditor/actuary contravention report instructions for the 2020 financial year, confirming SMSF auditors would not be required to report a number of breaches that might occur as a result of COVID-19 rent relief measures.