COVID-19: determination on SMSF in-house assets finalised

The ATO has finalised a legislative instrument that excludes certain assets of self-managed superannuation funds (SMSFs) from being in-house assets in response to COVID-19.

The Self Managed Superannuation Funds (COVID-19 Rental income deferrals – In-house Asset Exclusion) Determination 2020 provides that an SMSF asset will not be considered an in-house asset where the asset arose due to the SMSF, during the 2019–20 and/or 2020–21 financial years, either:

• allowing a related party tenant to defer payment of rent under a lease (on arm’s length terms) due to the financial impacts of COVID-19, or
• holding an interest in a company or unit trust that is exempt from being an in-house asset due to the operation of reg 13.22B or 13.22C of the Superannuation Industry (Supervision) Regulations 1994, and that company or unit trust allows a tenant to defer the payment of rent under a lease (on arm’s length terms) due to the financial impacts of COVID-19.

The asset will not be an in-house asset of the SMSF in the year that rent was deferred or any future income years.

The National Cabinet Mandatory Code of Conduct and relevant state based codes may assist in determining whether a deferral has been negotiated in good faith and on arm’s length terms. To ensure that an arrangement is on arm’s length terms, contemporaneous documentation reflecting the terms of the deferral agreement should be kept and deferred amounts should be repaid by the tenant as soon as is practicable.

The determination commences on 27 November 2020.