Residency Rules for SMSF Trustees Living Overseas
If you’re an SMSF trustee planning to live overseas for an extended period, maintaining your super fund’s status as an “Australian superannuation fund” is crucial to keep the associated tax benefits. The Tax Office requires you to pass three specific tests to meet this requirement.
Test 1: Establishment and Investment
This test is straightforward: your fund must have been established in Australia or hold investments here. Existing SMSFs generally meet this criterion.
Test 2: Central Management and Control
Central management and control of the fund must be ordinarily in Australia. This involves strategic or high-level decision-making about the fund, such as reviewing investment strategies, appointing new suppliers, or making significant investment decisions. Routine administrative tasks do not count as central management and control.
Short-Term Overseas Trips
A temporary overseas stay, such as a three-month holiday, does not affect the SMSF’s status. Even if important decisions are made during the trip, it can be argued that central management and control remains in Australia if the trustee’s intention is to return shortly.
Longer Absences
For longer trips, like a year-long work assignment, the key questions are whether the trustee intends to return, maintains a home in Australia, and has a predictable return timeframe. Positive answers to these questions help ensure that central management and control is still considered to be in Australia.
No Blanket ‘Two-Year Rule’
There is no universal two-year rule. Trustees intending to leave Australia permanently face a central management and control issue immediately. A clear and short timeframe for returning is essential to maintain compliance.
Delegating Responsibility
If the situation is unclear, trustees can appoint someone else to manage the SMSF in their absence using an enduring power of attorney. For example, appointing an adult child as a trustee ensures the fund remains compliant. The original trustees must formally resign, and the new trustee must genuinely make decisions about the fund without simply taking instructions.
Test 3: The Active Member Test
This test requires that the majority of member balances be held by Australian tax residents if contributions are intended. To comply, trustees often avoid making contributions to their SMSF while they are non-residents. Contributions can be made to a public offer super fund and transferred to the SMSF upon returning to Australia.
Planning Ahead
It is crucial to address these compliance issues before moving overseas. Once the trustees realize they have a central management and control or active member problem, it may be too late to correct it.
For detailed guidance and to ensure your SMSF remains compliant while you are overseas, contact BOA & Co. Financial Group at 1300 952 286 or email info@boanco.com.au. Visit our website at www.boanco.com.au for more information.