Temporary rent reduction

This covers the situation where an SMSF owns real property which is leased to a related party. The property is typically business real property due to the in-house asset restriction. The rent must be “no more favourable to the other party than those which it is reasonable to expect would apply, if the trustee were dealing with the other party at arm’s length” (Section 109 SIS Act).

In its SMSF Q&A update, the ATO takes the following position in relation to rent reduction:

“Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019-20 and 2020-21 financial years is that we will not take action where an SMSF gives a tenant- who is also a related party - a temporary rent reduction during this period.”

The ATO’s suspension of compliance action in the above regard applies to related party tenants under both LRBA and direct rental arrangements.

In its SMSF Q&A update, the ATO takes the following position in relation to rent reduction:

“Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019-20 and 2020-21 financial years is that we will not take action where an SMSF gives a tenant - who is also a related party - a temporary rent reduction during this period.”

The ATO’s suspension of compliance action in the above regard applies to related party tenants under both LRBA and direct rental arrangements.