It was established in Australia, or at least one of its assets is located in Australia.
To set up or maintain an SMSF in Australia you need to ensure that all members satisfy the ATO’s SMSF residency rules. To satisfy these rules the SMSF must meet 3 conditions.
1. The SMSF was established in Australia or one of its assets is located in Australia.
2. The central management and control of the fund is ordinarily in Australia. You can temporarily leave the country for up to 2 years but if you leave permanently, or work as a resident elsewhere, you’ll fail the residency test.
3. The SMSF either has no active members (members adding money to the fund) or it has active members who are Australian residents and who hold at least 50 per cent of:
- the total market value of the fund’s assets attributable to super assets, or
- the amounts that would be payable to active members if they leave the fund.
If your SMSF fails the residency test and becomes a non-complying fund then your fund can…
- be taxed at 47% on profit for the year it is non-complying
- be hit with a tax bill equivalent to half the funds assets
If you know you are going to fail the residency test you should consider winding up the SMSF and rolling your super back into a retail fund. You could, however, appoint a resident enduring power of attorney to act as SMSF trustee on your behalf while you are away. Or, if you have a corporate trustee, you could appoint an alternate director to act as trustee director in your absence.
If considering the power of attorney or alternate director options you should seek professional legal advise as the other person will effectively be in control of your super. Our legal partners can provide advice and the paperwork required to to keep an SMSF while overseas. Please contact us to enquire.
As a simple guide, if you are working overseas you cannot contribute to the fund. If you are living overseas (or away for longer than 2 years), without legal gymnastics you cannot have an SMSF and will need to wind it up.
For more information here is the ATO websites link discussing residency status for SMSFs.