ATO on SMSFs providing rent relief during COVID-19

The ATO has indicated in its FAQs for SMSFs that it will not take compliance action against or penalise SMSFs that contravene the sole purpose test or in-house asset rules when providing rental relief to a related party due to the impact of COVID-19. 

SMSF auditors will therefore not need to report such breaches in the 2020 Auditor/Actuary Contravention Report (ACR). Auditors can use the National Cabinet Mandatory Code of Conduct for commercial leasing principles and information on the Australian Banking Association’s website for commercial loan relief to assess whether the relief is provided on a commercial basis. If auditors are not satisfied the relief offered by the SMSF trustee is either on commercial terms or offered due to the adverse financial impacts of COVID-19, they should report the contravention and explain in the ACR why there is a breach.