expat smsf

Australian Expat Self Managed Superannuation Fund (SMSF)

With the rise in popularity of these accounts its highly likely that you may have a Australian Expat Self Managed Superannuation Fund (SMSF). These accounts add an extra layer of complexities in how Australian expats manage their superannuation.

We often find that when Australians first become an expat, and they manage their superannuation through an SMSF, they didn’t realise that by moving overseas they run the real risk of making their SMSF non-compliant.

To be eligible for concessional tax treatment, a superannuation fund needs to meet the definition of ‘Australian superannuation fund’ (ASF), along with other conditions.

Under s.295-95(2) of the ITAA97 a super fund is considered to be an ASF if all three of the following conditions are met

The 3 conditions

The fund was established in Australia

Central Management and Control (CMC) of the fund is ordinarily in Australia

The fund has no active members or at least half of the funds’ assets relative to active members who are Australian residents

Fund Established in Australia

An SMSF is established in Australia when the initial contribution to start the fund is paid to and accepted by the trustee or trustees in Australia. It is not necessary for the trust deed to be signed and executed in Australia. If a super fund was not established in Australia, it will satisfy the test if at least one asset of the fund is situated in Australia at the relevant time.

The location of an asset is determined by reference to the type of asset and the common law rules established by the courts for assets of that kind. This is a ‘once-and-for-all’ requirement that, when satisfied, is relevant for all times. The location of an asset is determined by reference to the type of asset and the common law rules established by the courts for assets of that kind. This is a ‘once-and-for-all’ requirement that, when satisfied, is relevant for all times.

Central Management & Control

The ATO says the central management and control (CMC) of a super fund involves a focus on the who, when and where of the strategic and high level decision making processes and activities of the fund. In the context of the operations of a super fund, the strategic and high level decision making processes include:

Formulating, reviewing and updating the fund’s investment strategy.

Monitoring and reviewing investment performance.

Formulating a strategy for managing reserves

Determining how the fund’s assets are to be used to pay member benefits.

In the majority of cases, the other principal areas of super fund operation, such as the acceptance of contributions and the investment of the fund assets, are not of a strategic or high level nature to constitute CMC. These activities form part of the fund’s day-to-day operations.

Establishing who is exercising the CMC of a super fund is a question of fact to be determined with reference to the circumstances of each case.

While it’s the trustee of the fund who has the legal responsibility or duty to exercise the CMC of a super fund, the mere duty to exercise CMC doesn’t, of itself, constitute CMC.

If the trustee performs the high level duties and activities of the fund, they will be exercising the CMC of the fund in practice.

There may be situations where a person other than the trustee is exercising the CMC of the fund. However, the mere fact the trustee uses an investment manager doesn’t mean the manager is in any sense exercising the CMC of the fund.

In some situations, a fund’s CMC may be outside Australia for a period of time. In general, the fund will still meet the ‘ordinarily’ requirement if its CMC is temporarily outside Australia for up to two years.

Also, the fund can still meet this requirement even if the CMC is temporarily outside Australia for more than two years. However, if the CMC of the fund is not temporarily outside Australia, it will not be ‘ordinarily’ in Australia at a time even if the period of absence of the CM&C is 2 years or less.

Whether the CMC of the fund is ordinarily in Australia is based on the fund’s circumstances at that time.

The Active Member Test

The third test that must be met is the active member test. This is satisfied if, at the relevant time:

The fund has no active members.

At least 50% of the total market value of the fund’s assets attributable to superannuation interests held by active members is attributable to superannuation interests held by active members who are Australian residents.

At least 50% of the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members is attributable to superannuation interests held by active members who are Australian residents.

A member is an active super fund member at a particular time if they are a contributor to the fund at that time, or are an individual on whose behalf contributions have been made. However, a member is not an active fund member at the relevant time if.

They are a non-resident

They are not a contributor at that time

The only contributions made to the fund on their behalf since they became a non-resident were made in respect of a time when they were an Australian resident.

Rollovers are treated as contributions for the purpose of the active member test.

As you can see careful planning needs to be done in order to preserve the benefits of your retirement savings. If you need assistance in ensuring that your Self-Managed Super Fund is compliant before you become an expat or would like to explore the alternatives available please feel free to contact us.

Find out more

The Three Stages In A Expats Life

Expat Financial Planning

Expat Superannuation

Expat Portfolio Management

Expat Tax Advice

Currency Exchange

Global Mobility Advisory Service

Expat Life Insurance

Expat Health Insurance

General Advice Disclaimer

The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Atlas Wealth Management Authorised Representative before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Atlas Wealth Management nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.