ATO, Property

ATO seeks input on in-house asset exclusion

in-house asset exclusion

The ATO is seeking feedback on a draft instrument that will provide an exclusion from in-house assets rules to SMSFs that provided COVID-19 rent deferrals.

The ATO has opened consultation on a draft legislative instrument addressing its compliance approach to SMSF landlords providing COVID-19 rental relief in the form of deferrals to a related-party tenant and opening up an exclusion in relating to in-house asset rules.

The regulator said the draft legislative instrument would provide an exclusion for SMSFs that had provided rental deferrals as a result of the financial impact of the COVID-19 pandemic from acquiring an in-house asset.

“Since a rental deferral amounts to a loan under the super laws, this can cause [an] SMSF to directly acquire an in-house asset or cause its investment in [a] regulation 13.22 entity to become an in-house asset as a result of the loan triggering an event in regulation 13.22D,” it said.

“Ordinarily this would mean the fund would need to dispose of the in-house asset before the next financial year where it exceeds the 5 per cent threshold.”

The ATO’s decision to make a determination under paragraph 71(1)(f) of the Superannuation Industry (Supervision) Act 1993 by way of the draft legislative instrument would allow SMSF landlords to avoid both types of in-house asset consequences, it pointed out.

“The legislative instrument will exclude the asset from being an in-house asset where the rental deferral has been offered on arm’s-length terms to the tenant under a lease during the 2020 and 2021 financial years due to the impact of COVID–19,” it added.

The draft legislative instrument is open for public consultation until the end of August.

In July, SuperConcepts technical education executive manager Graeme Colley said trustees who granted rent relief to tenants as a result of COVID-19 must factor in the impact of such concessions on their 2020 tax returns.

In April, Cooper Grace Ward partner Scott Hay-Bartlem said 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, needed to ensure any changes to leases were well documented.

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