“You need to be very conscious of understanding what the member’s total super balance is, because if a [member’s] balance remains under $1.6 million, then quite clearly there are some different actions that may be able to be taken,” Mr Dunn explained in a Smarter SMSF webcast this week.

If the decision to not account for the COVID-19 economic effect meant that a TSB remained under $1,600,000, or $500,000 for example, allowed the member to be able to undertake certain actions such as making additional non-concessional contributions or catch-up contributions, the ATO may look to apply Part IVA, he warned.

Mr Dunn said this would be similar actions to those listed in SMSFRB 2018/1, the ATO’s Regulator’s Bulletin on the use of reserves by SMSFs.

“The ATO said in [SMSFRB 2018/1] that Part IVA would apply to arrangements where the use of reserves allowed for a reduction in member’s TSB to make additional NCCs and catch-up contributions allows a member to allocate a greater amount to retirement phase or to use the segregated method to calculate ECPI for an income year,” he said.

“This isn’t to say that if didn’t account for [rent deferrals] and [loan relief] and nothing happened in the subsequent year that we would necessarily have a problem, but we would need to look at what action is taken by the member in the subsequent year based on their TSB amount.”

For example, if the attribution of the rental deferral or loan relief means that a member’s TSB would be a higher value and perhaps cross a TSB threshold and it isn’t accounted for and an action taken in that subsequent year is done as a result of trying to stay under that, then it’s arguable that the ATO would apply Part IVA, he warned.

“For instance, let’s say there was a decision to actually start a pension for the client and sell a particular asset and extinguish that loan. Maybe there is quite a substantial capital gain on that asset based upon its current value and if we try to apply a segregated approach to that fund, then in essence we may not have been otherwise eligible to do so because it may have been deemed as disregarded small fund assets,” he explained.

“So, just again be conscious of these different TSB thresholds and what impact they have in determining of how you account for these different elements inside the fund.”