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Athithan Vimaleswaran

Feb 26, 2024

Residency Status of SMSF

in SMSF Technical Forum

I'd like to inquire about the potential impact of residency status on the Super Fund for some of our members. These members are planning to reside in Italy for nine months with a subsequent three-month stay in Australia.

Would appreciate if you could clarify whether this alternating residency pattern would affect the Super Fund's residency status. Thank you.

3 comments

Comments (3)

THE AUDITORS INSTITUTE

Feb 26, 2024

Hi Athithan

One of the tests that has to be complied with is that central management and control of the Fund be ordinarily in Australia.

The ATO explains the rules at:

https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/setting-up-an-smsf/check-your-fund-is-an-australian-super-fund

The ATO states re the central management and control that:

"In general, your fund will still meet this requirement even if its central management and control is temporarily outside Australia for up to 2 years. If central management and control of the fund is permanently outside Australia for any period, it will not meet this requirement."

I note it is the Income Tax Assessment Act 1997 section 295.95(4) that also states:

"To avoid doubt, the central management and control of a * superannuation fund is ordinarily in Australia at a time even if that central management and control is temporarily outside Australia for a period of not more than 2 years."

My view is that as they are not outside of Australia for a period greater than 2 years, they can argue that the central management and control of the Fund is ordinarily in Australia.

If any other forum member has a view please let the forum know.

Thanks

The Auditors Institute

Athithan Vimaleswaran

Feb 26, 2024

Replying to

Thanks for your reply. The members of the superannuation fund intend to establish a recurring pattern of residing in Italy for 9 months and in Australia for 3 months each year. In light of this ongoing arrangement, how would the ATO determine the location of the central management and control? Please advise. Thanks.

THE AUDITORS INSTITUTE

Feb 29, 2024

Replying to

Hi Athithan

There is guidance in Tax Ruling 2008/9 "Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997".

Paragraph 32 states that:

"While the CM&C of a fund can be outside Australia for a period greater than 2 years, the period of absence of the CM&C must still be temporary. Furthermore, if the CM&C 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."

Focusing on the second sentence in para 32 of TR 2008/9, the ATO does envisage that even if you are away from Australia for less than two years, if this absence in not "temporary" you can still have CM&C (central management and control) outside of Australia. If there is a deliberate intention to be effectively away from Australia on an ongoing basis but return once every year for a number of months, I think this may be a situation where CMAC is more than "temporarily" outside of Australia. To be safe, would suggest an Enduring power of attorney is put in place to have another person act as trustee in their place.

I would suggest the trustees get legal advice re their position or contact the Australian Taxation Office to get clarification.

Thanks

The Auditors Institute