The Government and the ATO have announced a number of measures in relation to the COVID-19 crises. These include:
SMSFs can reduce rent payable to related tenants
The ATO has confirmed that it will take no compliance action against SMSFs that give a related party tenant a temporary reduction in rent during the 2019/20 and 2020/21 years.
This is a sensible, and welcome, approach from the ATO that alleviates the need to show evidence that market value rent has reduced or that it is an arm’s length dealing to alter the terms of the lease to reduce rent. The ATO Q&A does not state by how much rent can be reduced and, therefore, it would be prudent for SMSF trustees to record their reasonings as to why rent was reduced. The rent reduction should also be recorded in a legal document (eg deed or exchange of letters etc).
Relaxation of the in-house asset 5% test
Similar to the period during the GFC, the ATO has confirmed that it will take no compliance action against a failure to comply with their obligations if the 5% limit is exceeded as at 30 June 2020.
The in-house asset rules provide that if an SMSF’s in-house assets exceed 5% at any 30 June, then by the following 30 June the SMSF trustee must prepare a plan and implement it (ie they must sell in-house assets to the extent the SMSF is above the 5% limit).
The ATO states that they will not undertake compliance activity if the rectification plan was unable to be executed by 30 June 2021 because the market has not recovered or it was unnecessary to implement the plan as the market had recovered.
Reduction in minimum payments for super pensions
The Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019/20 and the 2020/21 financial years. For ATO information in relation to the measure, click here.
For account based pensions, the reduction of the rates is illustrated in the below table.
Another option for affected SMSF trustees and members is to consider ceasing their pension in whole or in part.
Early access to super benefits
The Government has passed legislation to allow members to access $10,000 of their super benefits in the 2019/20 year and from 1 July 2020 until 24 September 2020 in the 2020/21 year. For ATO information in relation to the measure, click here.
To apply for early release, a member must satisfy one or more of the following requirements:
They are unemployed; or
They are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
On or after 1 January 2020, either
they were made redundant; or
their working hours were reduced by 20% or more; or
if they are a sole trader - their business was suspended or there was a reduction in their turnover of 20% or more.
For further information please contact:
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E: pbroderick@sladen.com.au
