What does your SMSF need to do to remain complying while you are overseas?

In order for your self-managed superannuation fund (SMSF) to remain as a complying superannuation fund and receive the associated tax concessions in any given financial year, it needs to remain an Australian superannuation fund throughout that financial year.

To remain an Australian superannuation fund, your SMSF must satisfy the following three residency conditions:

  1. The SMSF must have been established in Australia;
  2. The central management and control of the SMSF must ordinarily be in Australia; and
  3. The SMSF must have either no active members, or other resident members holding at least 50% of the benefits.

Central management and control of the SMSF

The first and third of the above three residency conditions are relatively self-explanatory. However, the second residency condition is a little more complex. It requires the strategic, investment related and main decisions of the SMSF to be ordinarily made in Australia.

If an individual who is a trustee (or a sole director of a company trustee) of a single member SMSF travels overseas for an extended period, this residency condition may not be satisfied. This is likely to result in the SMSF no longer being an Australian super fund, becoming non-complying and potentially being taxed at the highest marginal rate.

To avoid this issue, a trustee (or a sole director of a company trustee) of a single member SMSF who wishes to travel overseas for an extended period should appoint a general and enduring attorney to act in their place. This is allowed by the Self Managed Superannuation Funds Ruling SMSFR 2010/2 which allows any individual who holds an enduring power of attorney in respect of a member of an SMSF to be a trustee of that member’s SMSF (or a director of the corporate trustee of that member’s SMSF, where applicable).

To appoint an enduring attorney as a trustee of an SMSF or as a director of a company trustee of an SMSF:

  • A valid General and Enduring Power of Attorney must be executed by the trustee or director;
  • The trustee or director must resign from their position as trustee or director;
  • The enduring attorney must consent to act as a trustee or director in the place of the retiring trustee or director; and
  • In the case of a company trustee, the company trustee must resolve to appoint the retiring director’s enduring attorney as a director.

Upon the completion of these steps, any trustee or director (now retired) of a single member SMSF will be free to travel overseas for any period without affecting the Australian superannuation fund status of the SMSF.

If you are heading overseas and want to ensure your SMSF remains complying, call us on 1300 654 590 for a no-obligation chat.