Possibly – but don’t panic! There are practical steps that can be taken to allow members to maintain their SMSF even whilst living overseas.
What is the issue? A SMSF ceases to be a complying Fund in a year in which it is not an Australian superannuation fund.
What problems does this cause?
There are two major consequences of a SMSF becoming non–complying. To be avoided at all costs!
- Loss of ongoing SMSF tax concessions
- The taxable portion of the market value of the SMSF’s assets being taxed at the top marginal tax rate.
What are the rules?
Section 295-95(2) “A superannuation fund is an Australian superannuation fund at a time, and for the income year in which that time occurs, if:
(a) the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and
(b) at that time, the central management and control of the fund is ordinarily in Australia;
and
(c) at that time either the fund had no member covered by subsection (3) (an active member ) or at least 50% of:
(i) the total * market value of the fund’s assets attributable to * superannuation interests held by active members; or
(ii) the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members;
is attributable to superannuation interests held by active members who are Australian residents.
Tax Ruling 2008/9 has also been released by the ATO to give guidance on each subsection above.
Practically, what steps should be taken?
Step 1:
Was the Fund established, or is any asset of the Fund situated in Australia?
99.99% of the time you would likely be able to answer automatically yes.
Stop and call me immediately if you can’t. Otherwise go to:
Step 2:
Is the management and control of the SMSF ordinarily in Australia? Practically a problem arises where the majority of trustees are going to reside outside Australia for more than 2 years.
If this arises, you should consider appointing a replacement trustee or trustees, who can take over management and control duties while the members are overseas. See our July 2015 blog, about people who can no longer be a trustee, for further information on appointing a replacement trustee.
Step 3:
Ensure that non-resident (tax) members do not contribute to the Fund, or have contributions made on their behalf.
Alternatively, ensure that the Fund has resident contributing members whose balance represents at least 50% of the value of the SMSF.
Following these three steps should allow your client’s SMSF to meet the “Australian superannuation fund” definition and allow non-resident members to maintain assets in a concessionally-taxed environment.
Please note that the information above is a broad overview so as always, if in doubt, please call to discuss your client’s specific circumstances.
If you would like help with any of these issues, please contact Joel Curry directly on
1300 TRISUP
or 02 4961 2788