Hello Rashmi
Thanks for the question.
Whilst there is a NALI risk where a super fund has received a prepayment of rent from a related party tenant, the issue becomes was there a commercial reason for the prepayment?
In some instances, a prepayment made by a Small Business Entity that relates to a period ending no longer than 12 months after the end of the income year in which it was made can be deductible to the payer, in full in the year the payment is made – please refer to section 82KZM of the Income Tax Assessment Act 1936.
If getting a tax deduction for the prepayment was the justification for the tenant’s action, then this could have occurred with even an arm’s length tenant.
Happy to hear the thoughts of other auditors on this matter.
Best regards
The Auditors Institute