As one of the most effective and fastest growing Australian superannuation fund, the SMSF can provide you with great benefits and ability to manage your own fund. As a result, many industries are implementing this fastest growing trend worldwide. This means that the number of Australians who will work overseas will grow constantly, and because of that more and more Australian SMSF members will be moving overseas for work purposes.
For that reason, many factors need to be considered by the finance advisers if someone of their active SMSF clients is moving overseas. The following text will give you the best information about some SMSF residency rules that must be followed in order for the self managed super fund to be managed and controlled properly and tax adverse consequences to be avoided.
In order for the self managed super fund to receive tax concessions, it must be an Australian resident fund. Consequently, in order to be in compliance with all ATO regulations and laws, your self managed super fund must satisfy the residency test. The SMSF residency test has three SMSF residency rules:
SMSF Residency Rule #1 – Established In Australia
This rule states that the SMSF must be established in Australia, and any other SMSF asset must be established and situated in Australia.
SMSF Residency Rule #2 – Central Management And Control
The central management and control of your super fund needs to be conducted in Australia. This means that all your SMSF strategic decisions and processes, as well as all high level duties and activities must be performed in Australia. These processes may include:
- Formulating the strategy of the SMSF;
- Formulating the strategy for the fund reserves;
- Updating the SMSF’s strategy and monitoring the performance of the SMSF;
- Considering how the resources of the fund are going to be used.
There are some exceptions to this SMSF residency rule, especially when the SMSF’s central management is being performed outside of Australia for a period of time (up to two years). This rule will not be met in case the central management of the SMSF is done offshore permanently.
SMSF Residency Rule #3 – Contributions
There are few SMSF residency rules about the concept of an active SMSF member, a member who makes real contributions to the SMSF. This rule will be met only if no actual contributions are made by the SMSF members during the time when one SMSF member is working overseas. You will need professional advice from an experienced finance adviser in case contributions will be made while the SMSF member is outside Australia.