We highlight below some extremely important measures the ATO has outlined in response to compliance by SMSF's in the current situation

Minimum Pension Payments

To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019–20 and the 2020–21 financial years.

Unfortunately, should a member have already withdrawn more than the minimum for 2019–20, they are not able to put the amount in excess back into their superannuation account unless eligible to make superannuation contributions and subject to any other rules or limits such as contribution caps.

Rent Reduction

Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19. The ATO compliance approach for the 2019–20 and 2020–21 financial years is that the ATO will not take action where an SMSF gives a tenant – who is also a related party – a temporary rent reduction during this period.

TIP: The impact of the SMSF should also be addressed when contemplating this approach.

In House Asset Restrictions

If, at the end of a 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. This plan must be prepared before the end of the next following year of income. If an SMSF exceeds the 5% in-house asset threshold as at 30 June 2020, a plan must be prepared and implemented on or before 30 June 2021.

However, the ATO will not undertake compliance activity 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

Trustees must prepare and implement an investment strategy for their SMSF, which they must then give effect to and review regularly. The strategy should be reviewed at least annually, and you should document that you’ve undertaken this review and any decisions arising from the review. Certain significant events, such as a market correction, should also prompt a review of your strategy and may require updating your investment strategy.

Where the assets of an SMSF or the level of investment in those assets fall outside of the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy.

The ATO do not consider that short term variations to your articulated investment approach, including to specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy. All investment decisions must be made in accordance with the investment strategy of the fund. If in doubt, trustees should seek investment advice.

If you have any questions about the above information, please do not hesitate to contact us.