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  • Self-Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination now registered

    In August 2020 we advised consultation was open for SPR 2020/2 Self-Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination (the determination) and accompanying Explanatory Statement (ES). The determination and ES have now been registered and becomes effective from 27 November 2020.

    As a result of the financial impacts of COVID-19, some self-managed super fund (SMSF) trustees have needed to provide rental relief in the form of deferrals to a related party tenant.

    Some SMSFs have also invested in regulation 13.22B and 13.22C entities who have also needed to provide rental deferrals to tenants.

    Since a rental deferral amounts to a loan under the super laws, this can cause the SMSF to acquire and hold an in-house asset.

    Generally, this would mean the fund would need to dispose of the in-house asset before the next financial year where it exceeds the 5% threshold.

    However, this determination states for the purposes of paragraph 71(1)(f) of the Superannuation Industry (Supervision) Act 1993, the resulting asset is not an in-house asset of the fund for the 2019–20 and/or 2020–21 years being the year or years of the relevant rental income deferral nor any future financial years, where during one or both of the 2019–20 or 2020–21 financial years the fund:

    • allows a related party tenant a deferral of rental income under a lease (on arm’s-length terms) due to the financial impacts of the coronavirus known as COVID-19
    • holds an interest in a related party which is exempt from being an in-house asset due to the operation of regulation 13.22B or regulation 13.22C of the Superannuation Industry (Supervision) Regulations 1994, and that related party allows a tenant a deferral of rental income under a lease (on arm’s-length terms) due to the financial impacts of the coronavirus known as COVID-19.

    The determination does not apply to rental waivers or reductions as this type of relief does not give rise to an in-house asset in the fund. However we have previously said that we won't be taking any compliance action for the 2019–20 and 2020–21 financial years if an SMSF gives a tenant, even one who is also a related party, a temporary rent reduction or waiver because of the financial effects of COVID-19 during this period.

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      Last modified: 27 Nov 2020QC 64221