The SMSF Association has used its 2016 budget submission to call on the government to change the legislation applying to Australians wanting to continue to make contributions to their SMSF while working overseas.
In particular, the industry body is recommending the legislation defining an Australian superannuation fund be amended whereby a fund is declared non-complying if three specific conditions are not met.
“SMSFs and small APRA (Australian Prudential Regulation Authority) funds can find themselves in breach of the active member test where a non-resident for taxation purposes contributes to the fund,” SMSF Association chief executive Andrea Slattery said.
“If the fund balance of this contributor/s exceeds 50 per cent of the balances of all the active members of the fund, then it becomes non-complying and loses its tax privileges,” Slattery said.
According to Slattery, the current rules were discriminatory towards SMSFs as only that type of super fund had to incur additional operating costs to ensure Australian superannuation fund status if the fund members worked overseas and continued to make contributions to the SMSF.
“The alternative to contravening the active member test is for SMSF members to make contributions to a large public offer superannuation fund while overseas and then transferring those contributions to the taxpayer’s SMSF on returning to Australia,” she said.
“This is inefficient, especially as transfers from APRA funds to SMSFs can be complex and slow, and increases the compliance burden on SMSF members who want to work overseas.”
For these reasons, the association said it believed the active member test was not serving any purpose other than increasing the administrative burden for SMSFs.
“It’s our belief that the active member test does not provide additional integrity to the superannuation system as the establishment and central control and management tests already ensure that only Australian-based superannuation funds can benefit from the tax concessions,” Slattery noted.
