In line with various concessions provided to businesses to soften the blow of the COVID-19 pandemic, the ATO has now released the following details of concessions for self-managed super funds (SMSFs) as well as advice: SMSFs temporarily reducing rent – due to COVID-19, many landlords are voluntarily giving their tenants a reduction in rent or a waiver of rent to help them survive the economic downturn.
As a consequence, the ATO has said it will not take compliance action for the 2019-20 and 2020-21 financial years where an SMSF gives a tenant, who is also a related party, a temporary rent reduction during this period. In-house asset restrictions – according to the ATO, if at the end of the financial year, the level of in-house assets of a SMSF exceeds 5% of a fund’s total assets, the trustees must prepare a written plan to reduce the market ratio of in-house assets to 5% or below.
It notes that this plan must be prepared before the end of the next following year of income. For example, if your SMSF exceeds the 5% in-house asset threshold at 30 June 2020, a plan must be prepared and implemented on or before 30 June 2021. Although due to the uncertainly in global recovery, the ATO has stated that it will not undertake compliance action if the rectification plan was unable to be executed because the market has not recovered, or it was unnecessary to implement the plan as the market had recovered.
Investment strategies – the ATO notes that investment strategies should be reviewed regularly (at least annually) and any decisions arising from the review documented. It says certain significant events such as a downturn in the market should also prompt a review and update of investment strategies if required. If during this uncertain time, you make short-term variations in your SMSF investment strategy (including specified asset allocations whilst adjusting investments), the ATO will not consider that a variation from the articulated investment approach.
Super balance losses – the ATO advises that while realised losses arising in an SMSF may be available to the fund to deduct against realised gains in future years, these losses are not available to individual trustee or beneficiary to deduct in their personal tax returns. Just as you don’t return any profit made in your SMSF as assessable income in your personal tax return, you cannot claim a deduction for the loss in your super balance, the ATO says.