Travelling overseas for an extended period of time is an exciting adventure and a chance to have a break. However, SMSFs do not take a break when you do, which is why it is important to ensure everything remains in line while you are away.
Trustees that travel or relocate overseas for an extended period may find the residency status of the SMSF, compliance status and ability to receive tax concessions to be affected. SMSFs that breach the residency rules are taxed at the marginal rate of 49% rather than the concessionary rate of 15%. Before travelling, trustees must consider the implications to their SMSF.
Fund recognised as an Australian fund:
The SMSF will be recognised as an Australian super fund provided that the setup of and initial contributions have been made and accepted by the trustees in Australia, however, the trust deed does not have to be signed and executed in Australia. An SMSF that has been established outside Australia will also satisfy the test if at least one of the fund’s assets are located in Australia.
Management and control of the fund carried out in Australia:
The central management and control of the fund must usually be in Australia. This means the SMSF’s strategic decisions are regularly made, and high-level duties and activities are performed in Australia, such as formulating the investment strategy, reviewing the performance of the fund’s investments and determining how assets are to be used for member benefits. Generally, funds will meet this condition even if its central management and control is temporarily outside Australia for up to two years. If central management and control of the fund is permanently outside Australia for any period, it will not meet this requirement.
In the event that the “ordinarily” requirement cannot be satisfied, consider;
- Appointing a legal personal representative with an enduring power of attorney.
- Winding up the fund and roll benefits over into a retail/industry fund.
- Converting the SMSF into an APRA fund.
Active member test:
An “active member” is a contributor to the fund or contributions to the fund have been made on their behalf. To satisfy this test, the fund will need to have active members who are Australian residents and hold at least 50% of the total market value of the fund’s assets attributable super interests, or the sum of the amounts that would be payable to active members if they decided to leave the fund.