30 June 2020 year end audit areas of focus – Part 3

Temporary COVID-19 Relief | In-House Asset

The ATO has responded to current market conditions, and has announced it will not take compliance action against SMSFs where:

• at 30 June 2020 the market value of an SMSF’s in-house assets is over 5% because of the downturn in the share market
• the trustee of the SMSF prepares a rectification plan
• by 30 June 2021, the rectification plan either:
  • cannot be effectively implemented because of market conditions
  • does not need to be implemented because the market recovers and the 5% test is again satisfied at 30 June 2021.

SMSFs should always monitor their in-house asset percentage, particularly approaching year end.

If the market value of the SMSF’s in-house assets exceeds 5% of the market value of all the SMSF’s assets at 30 June 2020 because, for example, of the share market downturn,

Below are some key requirements when trustee dealing with in-House assets affected by COVID-19 include:

• prepare a rectification plan
• monitor the situation throughout the 2021 financial year
• attempt to implement the rectification plan
• document the attempts and any inability to implement the rectification plan.

What audit action / response is required?

No actions are required from the auditors if the in-house asset position is impacted by the effects of COVID-19 and there is rectification plan prepared.