Hot Issues
spacer
Fringe Benefits Tax (FBT): employees’ private use of vehicles
spacer
ATO to contact clients over bank details
spacer
ATO claws back $850m in unpaid SG in FY 17-18
spacer
Appetite for property in SMSFs shows signs of life despite tough market
spacer
Superannuation gender gap narrowing, research shows
spacer
Identification numbers for directors
spacer
How financial advice helps create wealth.
spacer
Australia's vital statistics
spacer
Unlocking equity crowdfunding in Australia
spacer
$20m boost for SME clients looking to exporting
spacer
Work-Related Expenses
spacer
ATO updates crypto guidance
spacer
ATO zones in on hundreds of newly created reserves
spacer
Senate passes $20,000 instant asset write-off extension
spacer
Victorian Vacant Property Tax
spacer
Director Penalty Notices
spacer
ATO set to pounce on undisclosed income streams
spacer
In case you missed it – The company tax Bill that did pass Parliament.
spacer
GST spotlight headed to smaller end of town
spacer
Superannuation Amnesty – Maybe! Maybe Not!
spacer
ATO drills in car-sharing focus this tax time
spacer
What is Bankruptcy?
spacer
Update of Australia's vital statistics
spacer
ATO speaks on risk factors, surveillance triggers for FY19
spacer
ATO’s corporate residency guidance cops backlash
spacer
ATO dispels top tax time myths to clients as clampdown rolls out
spacer
Tools for budgeting, cash flow, Super and more ….
spacer
Guidance for SMSFs on transfer balance reporting
Article archive
spacer
Quarter 3 July - September 2018
spacer
Quarter 2 April - June 2018
spacer
Quarter 1 January - March 2018
spacer
Quarter 4 October - December 2017
spacer
Quarter 3 July - September 2017
spacer
Quarter 2 April - June 2017
spacer
Quarter 1 January - March 2017
spacer
Quarter 4 October - December 2016
spacer
Quarter 3 July - September 2016
spacer
Quarter 2 April - June 2016
spacer
Quarter 1 January - March 2016
spacer
Quarter 4 October - December 2015
spacer
Quarter 3 July - September 2015
spacer
Quarter 2 April - June 2015
spacer
Quarter 1 January - March 2015
spacer
Quarter 4 October - December 2014
Beware residency rules if moving overseas

SMSF trustees are often unaware that if they move overseas for an extended period of time, their SMSF may fall foul of the ATO’s residency rules and they may face a heavy tax bill.

     

In order to satisfy the residency rules, SMSFs must meet three conditions:

  1. It was established in Australia, or at least one of its assets is located in Australia.
  2. The central management and control of the fund is ordinarily in Australia.
  3. It either has no active members or it has active members who are Australian residents and who hold at least 50 per cent of:

  • the total market value of the fund’s assets attributable to super assets, or
  • the amounts that would be payable to active members if they leave the fund.

Generally speaking, the first condition is readily satisfied, but the other two can cause problems if members move overseas for a period of time, usually defined as over two years.

If these conditions aren’t met, then the fund can lose its complying status, which has significant tax implications. They include:

  • taxing assessable income of the SMSF at 47 per cent (or 45 per cent for income years before 2014/15), and
  • a one-off additional tax bill in the year that it becomes non-complying that would result in the fund losing almost half its assets.

So what are the options for SMSF trustees and members who are considering moving overseas temporarily or taking an extended trip?

If trustees know they will be away for more than two years, or even if they are planning a shorter trip but it may end up being permanent, they should take steps to protect their superannuation before heading off.

This could involve transferring their benefits to a public offer fund and winding up their SMSF.

Alternatively, if they want to keep their SMSF running, but do not currently have at least 50 per cent of trustees living in Australia to manage and control the fund, they should appoint additional resident trustees/members to the SMSF, for instance adult children.

They could also appoint a resident enduring power of attorney to act as SMSF trustee on their behalf while they are away. Or, if they have a corporate trustee, they could appoint an alternate director to act as trustee director in their absence.

The main difference between an alternate director and an enduring power of attorney is that the power of attorney can continue acting on behalf of the member in the event of their incapacity. However, the role of alternate director will cease if the trustee is incapacitated, that is, the role of director ceases.

They should also take steps to ensure the ‘active member’ condition is satisfied. Active members are those who are making contributions or rollovers to the SMSF. Therefore, even if the central management and control test is met, if an overseas SMSF member contributes to the fund, then the SMSF will become non-complying if the overseas members combined hold more than 50 per cent of the SMSF’s assets.

Contributions or rollovers for these overseas members can instead be made to a local public offer, retail or industry fund while overseas and then they can choose to transfer these benefits into their SMSF when they return to Australia.

In most cases, the best approach is for all members, local and overseas, to avoid making contributions or benefit rollovers to the fund while a fund member is overseas for an extended period.

While these steps are relatively straightforward, they need to be put in place before moving overseas. Therefore, SMSF trustees and members should ensure they talk with their advisers before undertaking any overseas moves.

Andrew Yee is director of superannuation and SMSF specialist at HLB Mann Judd Sydney.

By Andrew Yee
12 Apr 2018
www.smsmagazine.com.au