Due to the ongoing financial effects of COVID-19, the ATO said it understands trustees of SMSFs are still finding themselves in a position where they, or a related party, are having to provide rental deferral relief to tenants.

“This situation may give rise to contraventions of the in-house asset provisions of the super laws. In summary, this is because a rental deferral provided by the fund to a related party tenant is considered a loan to the related party, which would ordinarily be an in-house asset of the fund,” the ATO said.

“If a fund has an investment in a related non-geared company or unit trust that is exempt from being an in-house asset under the super laws, and the related party provides a rental deferral to a tenant, this will cause the exemption to cease and the investment to become an in-house asset.

“If the value of the asset, or the total value of the fund’s in-house assets, exceeds the 5 per cent in-house asset threshold at the end of the income year, the fund ordinarily needs to dispose of the asset or the excess before the end of the next income year.”

In recognition of the ongoing impact of COVID-19, the ATO has extended the availability of the rental deferral relief currently offered for the 2019-20 and 2020-21 income years to cover the 2021-22 income year. 

The relief that applies to the 2019-20 and 2020-21 income years is set out in Self-Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination 2020.

Under this determination, made by way of legislative instrument (LI) for the purposes of paragraph 71(1)(f) of the Superannuation Industry (Supervision) Act 1993, the relevant asset is not considered an in-house asset for the 2019-20 and/or 2020-21 income years, or any future income years, provided certain conditions are met. 

In September 2021, the ATO had also published news articles for SMSF trustees and approved SMSF auditors advising them of the extension and planned to make a similar determination by way of an LI for the 2021-22 income year.

“A draft LI extending the relief to cover the 2021-22 income year, and related explanatory statement, was published on our website on 22 November 2021 and is now available for consultation until 17 December 2021,” the ATO explained.

“A link to the draft LI and explanatory statement, and details for providing feedback, can be found on the ATO Consultation hub under the See also section.

“SMSF trustees and auditors should review the draft LI and provide any comments to us by the due date.

“In the interim, we will adopt the compliance approach referred to in the articles and detailed in the Addendum to the Auditor/actuary contravention report instructions.”