SMSF Residency

Residency of self-managed super funds

If you work or live overseas while you are a member of a SMSF, you have to find a solution to pass the residency test. If SMSF fails residency tests, it may become a non-complying fund and is subject to penalty tax.

What is the residency test ?

The residency test has three elements:

– your SMSF was established in Australia, or at least one of the fund’s assets is located in Australia.

– the central management and control of your fund is ordinarily in Australia

– your fund must have no active members, or have active members who are Australian residents and who hold at least 50% of the total market value of your fund’s assets.

When is a fund established in Australia?

An SMSF is established in Australia when you are paid and accept the initial contribution to establish the fund in Australia.

What is ‘the central management and control’ of the fund?

The central management and control’ of your SMSF is the strategic and high level decision-making processes of the fund. These include carrying out duties like formulating the investment strategy of the fund and reviewing the performance of the fund’s investments.

What does ‘ordinarily in Australia’ mean?

If your SMSF’s strategic decisions are regularly made, and high level duties and activities are performed, in Australia, you pass this test.

Whether the central management and control of your fund is ordinarily in Australia is based on the fund’s circumstances at that time.

When is a member an active member?

A member is considered to be an active member of your SMSF if:

• they are a contributor to the fund, or
• contributions to the fund have been made on their behalf

What the solutions if you live or work overseas?

• Keep your SMSF, resign as trustee and appoint a new trustee
• Roll over your SMSF balance to industry or retail super funds

Contact iCare Super to get advices if you have the residency issues with your SMSF.