Travelling trustees still had “Australian” super fund

SMSF members overseas

An ATO private binding ruling has found an SMSF was an Australian super fund despite its members spending a significant amount of the income year overseas.

The ATO has ruled a two member SMSF where both members resided overseas for a significant period of an income year can still be treated as an Australian superannuation fund.

In a recent request for a private binding ruling questioning the residency of the SMSF due to the fact its members were overseas at the same time for a significant portion of the income year, the ATO found the fund was still an Australian super fund for the purposes of sub section 296-95(2) of the Income Tax Assessment Act 1997 (ITAA 1997).

The private binding ruling involved an SMSF established in Australia consisting of two Australian resident members, one of whom had left Australia to care for their sick parents. The other member travelled overseas to join the first at a later date.

While the first member remained overseas, the second member who held expertise in relation to the fund’s investment strategy, returned to Australia for a period of time.

Both members indicated their intention to return to Australia following the passing of their parents.

The ATO pointed out the ruling represented the Commissioner’s interpretation of the definition of being an ‘Australian superannuation fund’.

“The first test that must be satisfied is that either the fund was established in Australia, or any asset of the fund is situated in Australia at the relevant time. This is a question of fact,” the ATO said.

“In this case, the Fund was established in Australia and therefore satisfies the requirement in paragraph 295-95(2)(a).”

The ruling also provided guidance on the meaning of central management and control (CM&C), the regulator added.

“The second test, and one of the key requirements that a superannuation fund must satisfy to be an ‘Australian superannuation fund’ at a particular time, is that the CM&C of the fund is ‘ordinarily’ in Australia,” it noted.

“Based on the facts of this case, the high level and strategic decisions relating to the fund were exercised at the relevant time in Australia.

“Accordingly, the CM&C of the fund is regarded as being ‘ordinarily’ in Australia.”

Earlier this month, the Tax Institute called for the residency test for SMSFs to be dropped as it was too complex and failed to prevent non-residents from contributing to Australian super funds.

Last month, the SMSF Association said the Government should reconsider the residency test for SMSFs because of the impractical nature of its application.

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