Overseas members SMSF – beware

Posted on November 13th, 2015

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By Robert Lindsay

Robert Lindsay is a Director at Mullane & Lindsay in Newcastle and leads our Commercial & Property Law team.

If a member of a Self-Managed Superannuation Fund (SMSF) spends more than two years overseas then he or she risks losing one half of their SMSF member entitlements. It is usual for the members of a SMSF to be the trustees unless the SMSF has a corporate trustee, in which event each member of the SMSF must also be a shareholder and director of the corporate trustee.

For an SMSF to be a complying fund and to receive concessional tax treatment, it must be an Australian resident fund. A real risk exists if members spend time working overseas. Residency rules apply. The residency rules provide that central management and control of the SMSF must be in Australia. If a trustee or director is absent from Australia for a continuous period of two years, then he or she may jeopardise the fund’s complying status. If however the trustee or director returns to Australia and remains for a minimum period of 28 days within the two year period, then the risk is removed.

The rules also provide that a non-resident member of an SMSF must not have more than 50% of the total fund of active members. The real risk is if a fund loses its residency status, then it will no longer be complying and the tax rate on its income and gains will change from 15% to 45%. There are other repercussions.

If a member of a SMSF intends working overseas and remaining overseas for a period in excess of two years (without returning to Australia for a minimum of 28 days) then the member should consider transferring his or her entitlements to a larger industry style fund. This may involve some inconvenience if the assets of the fund cannot readily be converted to cash. If an individual is a member of a SMSF and proposes accepting an overseas assignment for two years or more, without returning to Australia during that time, then he or she should seek advice in relation to their Superannuation prior to departing.

Robert Lindsay is a Director at Mullane & Lindsay, and practises extensively in Commercial Law, Property Law and Wills & Estate Planning. If you require any assistance in this area please contact Robert Lindsay to arrange a consultation or contact our Newcastle office. 

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