COVID-19 – more superannuation measures from the ATO – LRBAs and SMSF residency

Further to our previous articles on COVID-19 superannuation measures that we discussed here and here, the Australian Taxation Office (ATO) has announced further superannuation relief measures.

Relief for related party limited recourse borrowing arrangements

The ATO has stated that temporary repayment relief may be offered for related party limited recourse borrowing arrangement (LRBA) loans.  The repayment relief must reflect similar terms to what commercial banks are currently offering for real estate investment loans as a result of COVID-19.  The ATO refers to the Australian Banking Association’s website for current information on COVID-19 bank relief

The ATO gives the following example of amended terms being offered by commercial banks – “these terms currently include temporary repayment deferrals for most businesses of up to 6 months, with unpaid interest being capitalised on the loan”.

The ATO also states that:

  • The parties to the arrangement must also document the change in terms to the loan agreement and the reasons why those terms have changed

  • It is also expected that there is evidence that interest continues to accrue on the loan and that the SMSF trustee will catch up any outstanding principal and interest repayments as soon as possible

  • Any further repayment relief needed due to the continued effects of COVID-19 should be reviewed at the end of the agreed deferral period and remain in line with what the commercial banks are offering at that time

SMSF residency where trustees/directors are unable to return to Australia

If the individual trustees of an SMSF or directors of its corporate trustee are stranded overseas due to COVID-19, in the absence of any other changes in the SMSF or the trustees’ circumstances affecting the other conditions, then the ATO has confirmed that it will not apply compliance resources to determine whether the SMSF meets the relevant residency conditions.

More information on reducing superannuation minimum pension payments

The ATO’s Q&A document now has further information in relation to the halving of minimum pension payments measure, including:

  • Requests to reduce pensions should be documented and considered in accordance with the SMSF and pension documentation

  • Amounts paid over the reduced minimums cannot be returned to the SMSF, but they can be contributed back into the fund as a contribution (provided the member is permitted to make a contribution)

  • Amounts already paid over the reduced minimums will be treated as pension payments not lump sums

  • The reason for the reduced pension payments should be recorded in the SMSF documentation – eg in trustee minutes

For further information please contact:

Phil Broderick
Principal
T +61 3 9611 0163  l M +61 419 512 801   
E  pbroderick@sladen.com.au         

Phil Broderick