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Hi,
One of my client, a SMSF has two members who are the trustees of the funds. the funds was established in 2010. in 2012 the funds purchased some shares. recently the trustees moved overseas and they are no longer Australian resident for tax purposes. they are trying to wing up the SMSF. they sold the shares in 2020 and made capital gain.
the question is, does the general capital gain discount apply to this SMSF? if so, how is the capital gain calculated?
Hi Riad
The residency rules are very complicated for a SMSF & the members / trustees. If a SMSF is a non resident Fund its assets & its income can be taxed at 45%.
That is if the Fund is a non resident Fund the capital gain would be taxed at 45%.
To be able to comment on your query I would need more details on their circumstances in relation to the rules that determine a resident Australian Superannuation Fund.
In the Fund's annual return question 8 asks if it is an "Australian superannuation fund".
Per the instructions for the annual return:
"If the SMSF does not meet the definition of Australian super fund at all times during the income year, the SMSF is not a complying SMSF and it will not receive the concessional rate of tax."
Further per the ATO a residency conditions are:
"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."
Thanks
SMSF AAA