There have been subsequent announcements over the last week regarding the Australian Tax Offices (ATO) stance on providing rent relief to tenants in a Self-Managed Superannuation Fund context:
It has been confirmed by the ATO that Self-Managed Superannuation Funds who hold rental properties will be allowed to offer a temporary rental relief to the tenants during this period (2019-20 and 2020-21 financial years) without the ATO taking action.
As of the 27th of March 2020, the ATO have confirm this is also the case where the tenant is a related party. Given the strict rules superannuation funds must be managed under, this is a surprising and much appreciate concession offered by the ATO.
If your tenant is an unrelated party and this is currently an option that you are being asked to pursue, please ensure that any agreements are well documented by either yourself as the landlord and trustee, or, if your property is managed by a third party, any agreements are documented by them. The ATO have not specified as to what level of substantiation would otherwise be required in the situation of an unrelated party, however, it would be expected that 1) some evidence is sought as to the financial duress of the tenant and 2) any freeze given is allowed by the signed lease agreement. If you have any queries on how this might be structured, please get in touch.
If your tenant is a related party the above documentation process applies, however there will be additional stipulations:
- Any rental reduction / freeze must be established it is in the best interest of the fund; and
- With regards to the circumstances of the tenant, you will need to consider particularly how COVID-19 has impacted the business and they will need to provide evidence and justification as to why they need a rent relief; and
- The terms of existing lease will need to be reviewed for clauses allowing for rental holidays / freezes – if your lease does not allow for these then you will need consider a lease review and or renegotiation; and
- You will need to determine how to best structure the new rental agreement and ensure it is in line with current market expectations; and finally
- You will need to continue to assess the situation and when appropriate revert to preexisting arrangements.
Although the above seems rather onerous, we are here to help. We are more than happy to assist in implementing the above in an efficient and compliant manner. We ask that if this is something you are considering you please get in touch with us immediately to begin this process. We must stress that this cannot be a retrospective action as this may be perceived by the ATO as being contrived.
Please note that as this is still a developing case there will be more information released over the next coming days / weeks and we will continue to update you as and when we find out.
If you have any queries regarding the above, please do not hesitate to contact Matt Yates (firstname.lastname@example.org) to discuss.