SMSF landlords must consider the consequences a commercial property rent waiver, as a COVID-19 economic relief measure, will have on other retirement savings elements, including contributions, before they agree to grant them, a technical expert has warned.
During the most recent Accurium technical webinar, SMSF specialist adviser Mark Ellem said even though the National Code of Conduct governing the coronavirus-driven rent relief stipulates half of the rent relief should come in the form of a waiver, trustees who were landlords need to consider the resultant outcome to the fund compared to a rent deferral.
“Any rent waiver is forever lost to the SMSF; [it] will never receive that. Any deferral we can recover at a later time,” Ellem said.
Due to this difference, and the permanency associated with waiving rent, he pointed out trustees must also consider the implications if the SMSF is required to claw back this type of relief measure.
“The rent that gets waived, that we’re never going to receive again, how can we catch that up? Well the only way to do that is by contributions,” Ellem cautioned.
“[However] we’re going to be restricted on catching up that lost, waived rent by making contributions because it will be subject to the contribution caps.”
The National Code of Conduct does allow tenants to choose to receive the rent relief in the form of a deferral, but he cautioned this approach was not without its own catches either.
“Note that it is the intention of the code not to burden businesses as they enter the [COVID-19] recovery period,” he said.
According to Ellem it means SMSF landlords must consider the tenant’s ability to pay back the deferred rent when it recommences trading after the coronavirus restrictions have been lifted, given the original rent charge will also apply at this time.
As such, the aforementioned intention of the code could have the effect of converting the rent deferral into a rent waiver, he said.