Is Your SMSF at Risk While Living Overseas? Here's What You Need to Know
Before heading overseas on an expatriate assignment, many Australians have a Self-Managed Superannuation Fund (SMSF)—typically with both spouses acting as trustees and members.
However, if you plan to be away from Australia for more than two years, your SMSF may fail the residency test, rendering the fund non-compliant and subject to the highest marginal tax rates in Australia.
What Are the SMSF Residency Rules?
According to the Australian Taxation Office (ATO), an SMSF is considered an Australian super fund if it satisfies all three of the following residency conditions:
Establishment in Australia: The fund must have been established in Australia, or at least one of its assets must be located in Australia.
Central Management and Control: Strategic decisions must ordinarily be made in Australia. This includes: Formulating the investment strategy Reviewing investment performance Managing reserves prudently Determining how assets are used for member benefits (Note: Temporary absences under two years are generally acceptable, but any permanent absence disqualifies the fund.)
Active Member Test: The fund must either have: No active members, or Active members who are Australian residents and hold at least 50% of: The total market value of the fund's assets, or The sum of all amounts payable to active members if they were to leave the fund.
What Should You Do If You’re Moving Overseas?
Again, quoting the ATO:
“If a member becomes a non-resident but still wants to contribute, they should do so through an Australian retail or industry fund, then roll those contributions into the SMSF when they return.”
If your SMSF fails the residency test, you should roll your funds into a resident-regulated super fund and wind up the SMSF. Failing to act could result in your fund becoming non-compliant.
An alternative worth exploring is establishing a foreign superannuation plan during your non-residency—something we’ll cover in our next post.
Final Thought:
If you or your spouse are planning an extended time offshore, seek professional advice early to understand your options and maintain compliance with SMSF residency rules.
Best wishes
Regards,
Dale Hoy
m) +61 419 364 994
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