The Government’s response to containing COVID-19 has caused total or partial disruption to a wide range of businesses. To ensure their survival, affected businesses have requested rent relief from their landlords.
Where the property is owned by your SMSF, it is unlikely that you will breach any laws by offering rent relief to an unrelated party.
The Australian Taxation Office (ATO) has confirmed that your SMSF can also provide a temporary rent reduction to related parties. While this would normally trigger a range of compliance breaches, the ATO has indicated that it will not take compliance action for either the 2020 or 2021 financial years. Furthermore, the ATO’s position is that there is no need for the rent reduction to be justified by market evidence.
Please note that SMSF landlords should only provide rent reductions to tenants who are suffering the effects of the COVID-19 crisis. The rent reduction should be reasonable and should be consistent with the approach taken by arm’s length landlords. It is also important that any rent reductions be properly documented.
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If you wish to provide rent relief to related-party tenants, please contact our office.