If you’re an expat currently working in Singapore or elsewhere, or even thinking about working abroad, it’s important that you’re not operating a non-compliant self-managed superannuation fund (SMSF). This could be a very expensive mistake so it’s important that you’re aware of your options.
There are three tests that a SMSF must satisfy in order to remain compliant:
1. It must be established or hold assets in Australia
This is the easiest of the three tests to meet. The SMSF must be established in Australia, and once this is determined, it will satisfy this test for all subsequent financial years.
2. Central management and control must ordinarily be in Australia
The central management of the fund focuses on investment and strategic decisions which must be made in Australia. This also includes reviewing the fund’s investment strategy and determining how funds are allocated. To be ‘ordinarily in Australia’, it does not mean that decisions can not be made while trustees are overseas, but this must be temporary.
To ensure that the overseas stay meets the ‘temporary’ criteria, steps you can take include:
- Booking a return flight to Australia
- Staying overseas for a pre-determined length of time
- Not entering into a long-term lease agreement overseas
- Not acquiring citizenship of another country
- Not giving up connections to Australia
3. Majority of active assets held by Australian residents
If there are non-resident members of the SMSF, it’s important that their share of the fund makes up no more than 50% of the balance if they’re active members. This highlights that you must be careful if /when making concessional or non-concessional contributions as a non-resident.
If your SMSF fails to meet these tests, then you risk losing all tax concessions and being taxed at the highest marginal rate. Ensure that you seek qualified financial advice and avoid this costly financial mistake.
To Your Financial Success!
Jarrad Brown is the trusted fee-based financial adviser for Australian expatriates living in Singapore and throughout Asia-Pacific.
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