SMSFs and COVID-19 relief – what auditors need to look at!
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The ATO have accepted that self-managed superannuation funds
(SMSFs) can provide rent relief and loan concessions to related
parties because of COVID-19 without breaching the SIS Act, but
there are limits – see other publications . https://www.cgw.com.au/publication/ato-updates-its-no-action-position-for-covid-19-rent-relief-provided-by-smsf-landlords-to-related-parties/ https://www.cgw.com.au/publication/smsfs-and-loans-from-related-parties-ato-provides-covid-19-relief-guidance/
In an addendum to the Auditor-actuary contravention
report instructions, the ATO have made clear what they require
auditors to obtain from SMSFs that have provided relief, so the
auditor does not have to qualify audit reports or report
Auditors must ensure that where an SMSF has provided rent relief
to a related party, it satisfies the following.
- The rent relief must be on commercial terms, following either
the National Cabinet Mandatory Code of
Conduct , or otherwise substantiated with evidence about
what other landlords are doing in the same circumstances. If the
rent relief is not consistent with the Code, then auditors should
ensure they have documents supporting the same kind of relief from
arms-length landlords in the same situation.
- The rent relief must be as a result of COVID-19, so the SMSF
must provide documentation of how the tenant has been
- The rent relief must be documented. Auditors must require a
contemporaneous document that amends the lease, and the parties
must then comply with the new terms.
The same issues apply where rent relief is provided by an entity
in which the SMSF has invested, rather than the SMSF itself.
Similarly, where SMSFs have provided loan concessions, auditors
must ensure they have appropriate evidence and documentation.
- The concessions must be consistent with what the banks are
providing. The ABA outlines what commercial lenders are
doing, and an auditor can accept loan concessions as appropriate if
consistent with this. Generally, interest should continue and be
capitalised to the loan.
- The loan concessions must be as a result of COVID-19, so the
SMSF must provide documentation of how it has been affected.
- The loan concessions must be documented, preferably as a formal
variation to the loan terms.
Other challenges for auditors
There is a range of other information auditors should be
ensuring they have in the appropriate circumstances.
- If the SMSF cannot obtain evidence to support values of assets,
then auditors should explain in their contravention report why (if
it is due to the impact of COVID-19, the ATO will take no action).
Auditors should ensure they receive evidence of how the SMSF’s
ability to obtain the valuation was affected by COVID-19.
- Auditors must be checking that any early release due to
COVID-19 satisfies the eligibility criteria, including that the
SMSF received the ATO determination before the release, that it was
made in only one lump sum payment equal to the amount in the ATO
determination, and that the trust deed allows the release.
If the auditor is satisfied of all the things the ATO has
highlighted, then no contravention needs to be reported.
If the auditor is not satisfied as to all aspects, they should
then qualify their audit and report the contravention if it meets
the reporting criteria.
Auditors must ensure they obtain the appropriate documentation,
or else consider qualifying their audit and reporting a
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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
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from this publication, please contact Cooper Grace Ward
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