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Retirement

Rent relief: The 7 steps SMSFs must take

By Grace Ormsby · May 06 2020
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Retirement

Rent relief: The 7 steps SMSFs must take

By Grace Ormsby
May 06 2020
Reading:
egg
egg
Rent relief

Rent relief: The 7 steps SMSFs must take

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By Grace Ormsby · May 06 2020
Reading:
egg
egg
Rent relief

The ATO may not be policing SMSF trustees who are providing tenants with rental relief, but there’s still a number of things landlords need to do.

SUPERCentral special counsel Maria Siu has said that while the Australian Taxation Office (ATO) has stated that it will not take action if an SMSF gives a tenant a temporary rent reduction, waiver or deferral, even where they are a related party to the fund, it is not in the form of a binding advice. 

Despite the ATO stance, there has been no formal change in the relevant requirements in the Superannuation Industry (Supervision) Act 1993 or in the Superannuation Industry (Supervision) Regulations 1994 regarding compliance. 

Among other things, Ms Siu has still flagged that SMSFs must remember that “ensuring temporary rent relief is on arm’s-length commercial terms between the SMSF and the tenant is fundamental to superannuation compliance”.

She’s written a practical checklist for SMSFs to ensure they are still complying with relevant legislation, with the key takeaways listed below.

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1. Collate and review the leading documentation and check the type and/or the terms of the existing lease

2. Check all relevant leasing laws that are applicable to the fund’s lease

According to Ms Siu, it’s advisable to check with the fund’s leasing lawyer of the applicable leasing laws.

3. Check whether rent relief negotiation is required by law

Make sure the negotiation is appropriate and in the financial interest of the fund given the current COVID-19 situation.  

4. Initiate rent relief negotiation

This is where you can request sufficient and accurate information about the financial stress suffered by the tenant as a result of COVID-19.

You should take into account any government support payments the tenant is currently receiving, either directly or as passed on to the tenant from the landlord (such as land tax relief).

5. Conduct due diligence

Make comparisons using comparable market to determine the structure and/or the amount of rent relief that is commensurate with the tenant’s current situation and financial stress.

This will be determined on a case-by-case basis, with Ms Siu flagging that there’s no set structure/amount/percentage to broadly suit all circumstances.

6. Implement rent reduction

This should be done in accordance with the lease agreement.

It’s advisable to formally implement the change with the fund’s leasing lawyer.

7. Document all aspects of the trustee’s decision in relation to the rent relief 

This should include:

  • Details of the agreed rent reduction
  • Reasons for the change
  • The evidence supporting the tenant’s financial stress
Rent relief: The 7 steps SMSFs must take
Rent relief
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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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About the author

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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