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  • Check your fund is an Australian super fund

    To be a complying super fund and receive tax concessions, your self-managed super fund (SMSF) needs to be an Australian super fund at all times during the financial year.

    If your fund stops being an Australian super fund because it does not satisfy the residency rules, it may become non-complying. Then its assets (less certain contributions) and its income are taxed at the highest marginal tax rate.

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    Fund residency conditions

    An SMSF is an Australian super fund if it meets all three of these residency conditions:

    1. The fund was established in Australia, or at least one of its assets is located in Australia. 
      • The fund was 'established in Australia' if the initial contribution to establish the fund was paid and accepted in Australia.
       
    2. The central management and control of the fund is ordinarily in Australia. 
      • This means the SMSF's strategic decisions are regularly made, and high-level duties and activities are performed, in Australia. It includes
        • formulating the investment strategy of the fund
        • reviewing the performance of the fund's investments
        • formulating a strategy for the prudential management of any reserves, and
        • determining how assets are to be used for member benefits.
         
      • In general, your fund will still meet this requirement 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.
       
    3. The fund either has no active members or it has active members who are Australian residents and who hold at least 50% of either 
      • the total market value of the 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.
       

    Note: For the purposes of condition 2, COVID-19s has resulted in many countries imposing travel bans and restrictions and a high degree of uncertainty around international travel.

    If the individual trustees of an SMSF or directors of its corporate trustee are stranded overseas due to COVID-19, in the absence of any other changes in the SMSF or the trustees’ circumstances affecting the other conditions, we will not apply compliance resources to determine whether the SMSF meets the relevant residency conditions.

    For the purposes of condition 3, a member is an 'active member' if they are a contributor to the fund or contributions to the fund have been made on their behalf.

    What to do if members go overseas

    If members are planning to go overseas for an extended period, get professional advice about maintaining the residency status of your SMSF.

    If a member of your fund becomes a non-resident but still wishes to make or receive contributions, they should do this outside their SMSF, for example through a retail or industry super fund. They can then rollover the contributions to their SMSF when they return as an Australian resident.

    If your SMSF fails the residency test, you should roll over your funds to a resident regulated super fund and wind up the SMSF. Otherwise the fund will become non-complying.

    Next step:

    See also:

    • TR 2008/9 Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997
    Last modified: 31 Jul 2020QC 23312