THE AUDITORS INSTITUTE | FORUM

Archived Forums

When you become a member of The Auditors Institute, you immediately gain access to expertise, advocacy for your profession and peace of mind.

Ask a question in our members-only forum or use the search function to find prior technical discussions on your topic. You can expect a response within 24-48hrs.

Want to become a Member?

Join Now

Already a Member?

Disclaimer

The forum is made available by The Auditors Institute Ltd for the benefit of it’s members only, and its primary purpose is to facilitate education, training, and discussion between members. The information and answers provided within the forum are of a general nature and do not consider any specific circumstances, objectives, financial situation or needs related to the matter/s raised. The responses should not be construed as financial advice, and each Member should seek their own professional advice before making any decisions. The Auditors Institute Ltd and its representatives are not responsible for any actions taken based on the information provided in the forum.

To test this feature, visit your live site.

toby

Mar 31, 2023

in SMSF Technical Forum

Hi,

In 2019 A SMSF owned commercial property is leased at market rate to related company. The lease is fully documented on standard commercial terms and formal independent market rent valuation is conducted. The lease is for 5 years with option for 5 more. The lease states a CPI rent review each year.

During the 2021 audit, independent evidence is obtained to show the market rate of rent is now considerably higher than the CPI increase that has been applied.

Do we have an issue?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Apr 02, 2023

Hi Toby

My view is that there is no issue in your example. This is assuming that when the lease was signed in 2019 it was done on an arm's length / commercial basis in compliance with section 109 of SIS.

The fact that the market rate of rent has increased in 2021 is not relevant if the lease agreement only refers to CPI changes over the period of the lease.

The change in the market rate of rent would only be relevant at the end of the lease or if the lease agreement required a review of rental based on the market rate of rent at a certain date or dates over the lease agreement.

Thanks

SMSF AAA