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Stephen Chiang

Oct 27, 2022

Covid-19 Rental Relief

in SMSF Technical Forum

I am auditing a fund which has a Covid-19 rental relief agreement to include the recovering period and expiring in March 2022. The real estate is a commercial property with a professional market valuation dated 30 June 2017 for $1,250.000. The trustee has used the same valuation for all the subsequent years.

I have asked the trustee to refresh the valuation for the 2021 audit citing that 3 years has lapsed.

Trustee has come back with the following minutes:

The Covid-19 Rent Relief provisions led to agreements with the tenant XXX, part of which was initially that the nominal rent be frozen for the initial Covid relief period to 28 March 2021, and then be extended for potentially a further 12 months to 28 March 2022 while the tenant was still affected by the reduce turnover provisions. It was agreed that the rent would be reviewed to market value at 28 March 2022. In view of the above, the directors are of the opinion that since the rental is currently frozen, the value of the property remain at $1,250,000 as at 30 June 2021, with a revised market value to be obtained after 28 March 2022 when a new annual rental would be obtained.

I did not think that the Covid-19 rental relief extended to include a moratorium effectively freezing the requirement for market valuation. Besides, the most recent valuation was dated 30.06.2017, not 30.06.2021 as quoted above.

Can I have a second opinion please.

2 answers0 replies

Comments (2)

Stephen Chiang

Oct 31, 2022

in relation to the above. The trustee has come back and produced a professional valuation as at 22 Mary 2022 for a market value of $1,500,000 and agreed to amend the financial statements for FY2021 to reflect this new value, Accountant citing that the cost to do a retrospective valuation would be $1000 and this cost could be saved if I accepted the May 2022 value instead.

I note that the rules about valuation cannot be more than 3 years old. But what about using a forward valuation that is 12 months ahead of the year under audit, is this acceptable?

I don't agree that the cost is a factor in a compliance issue.

If I accepted this argument and adopted a valuation that was 12 months ahead, will I have sufficient grounds with the ATO to clear my audit quality?