As previously discussed here, the ATO has now finalised the legislative instrument Self-Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination 2020 (Determination). The Determination does not materially differ from the draft version.

As provided in the draft, the Determination ensures that an SMSF asset will not be considered an in-house asset for the purposes of section 71(1)(f) of the Superannuation Industry (Supervision) Act 1993 where the SMSF, during the 2019-20 and 2020-21 financial years:

(a) allows a related party to defer the payment of rent under a lease agreement (on arm’s length terms) because of the financial impact of the coronavirus known as COVID‑19 which creates an asset held by the fund, or

(b) holds an asset that is an interest in a company or unit trust which is not an in‑house asset under regulation 13.22B or regulation 13.22C of the Superannuation Industry (Supervision) Regulations 1994, and that company or unit trust allows a tenant to defer the payment of rent under a lease (on arm’s length terms) because of the financial impact of the coronavirus known as COVID‑19

Importantly, the protection afforded under the Determination will not extend to circumstances where rent was deferred but the requisite financial difficulty was not present or the deferral was greater than what would be considered to be an arm’s length deferral. Therefore, SMSF trustees utilising the relief under the Determination should keep records as to why the deferral is on arm’s length terms. This could include being based on benchmarked evidence of arm’s length deferrals, relying on legislative deferral measures or applying the National Cabinet’s mandatory code of conduct.

To discuss further or for more information please contact:

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au