1. Trustees Obligations to SMSF Members
a. All decisions are made to maximise growth in retirement savings of the member/s.
2. Applying Trustee Obligations to COVID-19 Rent relief and State rules.
a. SMSF’s should not offer rent relief to tenants unless;
i. The tenants have requested it &
ii. The tenant has evidence to prove that their ability to pay rent has been impaired by COVID-19.
3. Trustee Obligations when lease is with a related party (Business Real Property only)
a. When setting relief or lease arrangements you must ensure that your decision making process is the same as it would be if you were dealing with an unrelated party -(arm’s length)
b. If documentation and evidence for decisions made by the Trustee is not provided to Auditors, a contravention of Super law may result.
4. Auditor reaction when relief has been given?
a. If the Trustee has followed the National Code of Conduct with the above-mentioned documentary evidence, Auditors will not qualify their report nor raise contraventions.
5. National Code of Conduct
In the best interests of all parties, transparent negotiation should be undertaken with the objective to keep existing lease agreements in place in line with the following guidelines. Landlords and tenants will be required to discuss relevant issues, to negotiate appropriate temporary leasing arrangements, and to work towards achieving mutually satisfactory outcomes.
Landlords and tenants will negotiate in good faith.
Landlords and tenants will act in an open, honest and transparent manner, and will each provide sufficient and accurate information within the context of negotiations to achieve outcomes consistent with this Code.
• Any agreed arrangements will take into account the impact of the COVID-19 pandemic on the tenant, with specific regard to its revenue, expenses, and profitability. Such arrangements will be proportionate and appropriate based on the impact of the COVID-19 pandemic plus a reasonable recovery period.
• The Parties will assist each other in their respective dealings with other stakeholders including governments, utility companies, and banks/other financial institutions in order to achieve outcomes consistent with the objectives of this Code.
• All premises are different, as are their commercial arrangements; it is therefore not possible to form a collective industry position. All parties recognise the intended application, legal constraints and spirit of the Competition and Consumer Act 2010.
• The Parties will take into account the fact that the risk of default on commercial leases is ultimately (and already) borne by the landlord. The landlord must not seek to permanently mitigate this risk in negotiating temporary arrangements envisaged under this Code.
• All leases must be dealt with on a case-by-case basis, considering factors such as whether the SME tenant has suffered financial hardship due to the COVID-19 pandemic; whether the tenant’s lease has expired or is soon to expire; and whether the tenant is in administration or receivership.
• Leases have different structures, different periods of tenure, and different mechanisms for determining rent. Leases may already be in arrears. Leases may already have expired and be in “hold-over.” These factors should also be taken into account in formulating any temporary arrangements in line with this Code.
• As the objective of this Code is to mitigate the impact of the COVID-19 pandemic on the tenant, due regard should be given to whether the tenant is in administration or receivership, and the application of the Code modified accordingly.
6. States have additional residential rules that can be applied. WA below:
a. Eviction moratorium for 6 months until 30 September 2020.
b. Rent Relief can be negotiated if COVID-19 Hardship occurs. Can be in the form of waivers, reductions and deferrals. There are no specific thresholds.
c. State government assistance of up to $2,000 where tenant has lost job, has less than $10,000 in savings and pays at least 25% of income in rent.
d. No rental increases until 30 September 2020.
e. Dispute resolution provided by Commissioner for Consumer Protection.
Steps to follow
1. Tenant should approach the Landlord to seek variation of the current lease arrangements.
2. Tenant should provide documentary evidence to show that ability to pay rent has been impaired.
3. Determine in writing the amount of reduction to be accepted, based on the individual factors of the tenant. Document the summary of discussion and resolution of the parties and the subsequent agreement.
4. Save documents in the file for Audit.
Whilst every tenant will be faced with a different scenario regarding their ability to pay, Audit will be simple if you follow the rules above and make sure your documentation is spot on.