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 attributable to super interests, or the sum of the amounts that would be payable to active members if they decided to leave the fund.
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:
What the solutions if you live or work overseas?
Contact iCare Super to get advices if you have the residency issues with your SMSF.