As financial conditions worsen, many landlords have been considering/offering their tenants a degree of rental relief to assist with both the survival of the tenant and the avoidance of a vacancy. SMSF trustees may provide this accommodation in the same way as any other landlord. An additional consideration comes into play when the tenant is a related party as there is a requirement for market rate treatment of related party tenants. Can this assistance be extended to related parties? The ATO has provided the flexibility required as per an extract form their Q & A below.

Question: My SMSF owns real property and wants to give my tenant – who is a related party – a reduction in rent because of the financial impacts of the COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the impacts of the COVID-19, will the ATO take action if I do this?

Answer: Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant – who is also a related party – a temporary rent reduction during this period.

This practical approach by the ATO is to be commended.