The ATO has confirmed certain COVID-19 compliance relief measures introduced in the 2021 financial year, when the pandemic first impacted Australians, will also apply to the 2022 income year.
Specifically, the relief measures will cover residency rules, rental payments, loan repayments and in-house asset compliance.
With regard to the residency rules, the SMSF regulator will not apply any compliance resources against fund trustees impacted by international travel restrictions causing them to be stranded overseas for more than two years and in danger of not being able satisfying the Australian super fund conditions. This will be the case as long as there are no other changes in the fund’s circumstances.
According to the regulator, compliance action will also not be taken if a contravention of the superannuation laws arises from rental relief provided by an SMSF or a related non-geared company or unit trust to a tenant by way of a reduction, waiver or deferral.
It said compliance action will not be enforced “if rental relief provided by a SMSF or a related non-geared company or unit trust to a tenant in the form of a reduction, waiver or deferral gives rise to a contravention of the super laws”, unless insufficient evidence is provided and it is not offered on commercial terms. The aforementioned arrangements must, however, be offered on commercial terms due to the financial impact of the pandemic and must be properly documented.
The ATO also revealed it will be making a determination similar to what it did last year ensuring any rent relief offered by an SMSF or related party to a tenant will not cause a loan or investment to trigger the in-house asset rules in the current and future financial years.
With reference to loan repayments, compliance enforcement will not be applied to any relief provided by an SMSF to either a related or unrelated party due to the financial impact of COVID-19 as long as it is done so on commercial terms.
Further, any relief given to an SMSF regarding a limited recourse borrowing arrangement involving a related party will not be deemed to have breached the non-arm’s-length income rules if it is done so on commercial terms and is properly documented.
Finally, a written strategy will be required for SMSFs that exceed the 5 per cent in-house asset threshold at 30 June 2021 due to the financial impact of the coronavirus, outlining a plan to reduce the value of those in-house assets to below the 5 per cent threshold by 30 June 2022. However, no compliance action will be taken if market conditions caused by COVID-19 prevent that strategy from being implemented or resulted in the trustees not having to implement the plan.
The regulator also took the opportunity to clarify the responsibility of SMSF auditors in light of the relaxation of compliance measures. To this end, it stipulated auditors must use their professional judgment to determine if any financial relief granted by the fund is in fact due to the effects of COVID-19 and if it has been offered on commercial terms.
“If there is insufficient appropriate evidence to support the relief, including that it is offered on commercial terms, SMSF auditors should report this to us via an ACR (auditor contravention report) where the reporting criteria is met,” it said.
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