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Administration, Superannuation

COVID-19 residency relief exists

residency status SMSF return

COVID-19 relief exists for the rules governing the definition of an Australian super fund, eliminating the need to report a change in residential status on the 2020 SMSF annual return.

A technical specialist has reminded practitioners there is no need to consider reporting a change in residency status on the 2020 SMSF annual return if the COVID-19 pandemic has forced trustees to breach the two-year limit on living overseas.

“If the trustees were temporarily residing overseas for less than two years, were about to return but became stranded overseas because of the COVID-19 health crisis, which has forced the trustees to go outside of the two years safe harbour, what will this mean to the fund?” specialist adviser Mark Ellem pondered during an Accurium webinar held today.

“In short, if the individual trustees of the SMSF, or directors of a corporate trustee, have become stranded overseas, but all the other requirements of temporary absence [are met], then the ATO is not going to apply compliance resources to determine if the SMSF meets the relevant residency conditions.

“So there has been a bit of a relaxation [of the rules] there.”

The situation in question pertains to the central management and control test that has to be satisfied for an SMSF to be considered complying. Specifically, trustees cannot reside overseas for a period of greater than two years.

Ellem emphasised the central management and control test is only one of three criteria, under section 295-95(2) of the Tax Act 1997, that need to be satisfied for an SMSF to be granted complying status.

“Test one is fairly easy to satisfy at all times – either the fund was established in Australia or it owns an Australian asset,” he noted.

“Test two [is] central management and control and [test three] is the active member test.

“But if the fund fails to satisfy all three tests at all times, it becomes a non-complying fund.”

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