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Reprieve extended for SMSFs that give or receive COVID relief

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Published by:
Peter Hetherington
Published on:
October 13, 2021
Modoras Accounting (QLD) Pty Ltd ABN 81 601 145 215
Reprieve extended for SMSFs that give or receive COVID relief

ATO to continue to go easy on SMSFs that provide or accept relief due to COVID-19

The Australian Taxation Office has extended the reprieve for SMSFs who effectively break SMSF laws by giving or receiving COVID-19-related relief.

Due to the virus’s ongoing financial impacts, fund trustees or related parties may still have “to provide or accept certain types of relief, which may give rise to contraventions under the super laws”, the ATO says.

In recognition of this, the ATO says it’ll effectively ignore SMSFs’ failure to comply with those laws in 2021–22.

This compliance relaxation, which applied in 2019–20 and 2020–21, covers the following types of relief:

Rental relief

The rental relief (including rental reductions, waivers and deferrals) must be:

  • offered on commercial terms (having regard to relevant state and territory COVID-19 support measures)
  • properly documented
  • supported by evidence provided to your SMSF’s auditor.

The ATO says a rental deferral offered by the fund or a related party will not cause a loan or investment to be an in-house asset in the current and future financial years.

Loan repayment relief

The loan repayment relief must be:

  • offered on commercial terms (having regard to the terms or relief offered by commercial lenders)
  • properly documented
  • supported by evidence provided to your SMSF’s auditor.

If the SMSF has a limited recourse borrowing arrangement in place with a related party and the lender offers loan-repayment relief, the ATO says it will accept that the parties are dealing with each other at arm’s length.

In other words, the repayments will not be treated as non-arm’s length income (NALI) and taxed at the maximum rate of 45%.

In-house asset relief

Funds that exceeded the 5% in-house asset threshold at 30 June 2021 must prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022.

That said, the ATO will not punish any breaches — for example, if markets don’t recover and the plan can’t be executed; or if markets recover and the plan turns out to be unnecessary.

SMSF residency relief

If SMSF members are stranded overseas due to COVID-19 for more than two years, their fund is at risk of breaching the SMSF residency rules.

However, the ATO says it will not investigate any breaches, “provided there are no other changes in the SMSF or your circumstances affecting the other residency conditions”.

Get expert advice

If you’d like more information on the COVID-19 relief your SMSF can give or receive and/or the conditions you must meet to avoid scrutiny by the ATO, we’d be happy to help.

Contact us for a complimentary consultation at info@modoras.com or 1300 888 803.

 

IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.

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