We have written about SMSFs providing rent relief to related parties, the issues involved, and the ATO's no action position ( see publication).
The ATO has now confirmed it expects auditors to review rent relief provided by SMSF trustees and report contraventions where appropriate.
What do auditors need to do?
The ATO has confirmed that auditors will not need to report breaches of superannuation legislation that relate to providing rent relief to related parties on the Auditor/Actuary Contravention Report.
However, the ATO does expect auditors to consider whether an SMSF providing rent relief to a related party is on commercial terms and due to COVID-19 impacts. The auditor can be satisfied as to the commerciality of the rent relief where both:
- the relief looks reasonable
- the trustee can show evidence the relief was documented and offered as a result of the adverse financial impacts of COVID-19.
Where an auditor is not satisfied, the auditor must report the contravention to the ATO.
The ATO's expectations confirm that auditors bear the onus and must take an active role in monitoring any rent relief provided by SMSFs to related parties, and the need for SMSFs to have good paperwork to support rent relief.
Auditors will also need to update their processes to properly identify rent relief issues, and ensure the risks associated with reviewing the appropriateness of rent relief is properly covered in their engagement documents and audit reports.
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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.