Intention key to temporary trustee absence

trustee absence

The absence of an SMSF trustee should be documented before departure to ensure the fund remains compliant and eligible for safe harbour exemptions.

The intentions of a trustee are key to demonstrating that any absence from Australia is temporary and thus ensuring their SMSF remains compliant, an SMSF legal expert has said.

Cooper Grace Ward senior associate Steven Jell said the intention behind a trustee’s decision to temporarily relocate was essential to qualifying for the two-year safe harbour exemption and should be documented in order to satisfy the SMSF central management and control requirement.

“Without a key intention to return to Australia, I think you’re always going to be very hard-pressed to demonstrate that any absence is only on a temporary basis,” Jell said during a recent Cooper Grace Ward webinar.

He pointed out documenting a trustee’s intentions was important to proving a fund’s compliance, despite the obvious difficulty in trying to demonstrate individuals’ intentions in general.

“There is very little and often zero documentation that can help when determining what someone’s intention happens to be. But when we’re looking at these points from a compliance point of view, the documentation is what we actually need,” he noted.

“It’s what we’re going to need to rely on if we’re ever required to justify what the party’s intentions were at a specific point in time.”

A return ticket to Australia would be an ideal way of demonstrating a trustee’s intention to return, but, failing that, a minute of a meeting setting out the trustee’s intention at the time of leaving could also be effective, he added.

“Whenever it comes to an argument regarding intention, having your ducks in a row and having your relevant documentation in place will be the key thing that really determines whether or not you’re likely to be successful in an argument,” he said.

Cooper Grace Ward partner Clinton Jackson said: “Realistically, the ATO is very sceptical of things that are prepared at the time that they ask a question. Obviously they have this view that everything you do from the moment they query you is self-serving. So anything you can do in advance to clearly outline and make sure everything is consistent with that intention really will help you.”

Jell also urged advisers to ensure new SMSFs satisfied initial contribution establishment requirements in order to avoid an ongoing obligation to prove compliance.

Last month, specialist adviser Mark Ellem reminded practitioners there was no need to consider reporting a change in residency status on the 2020 SMSF annual return if the COVID-19 pandemic had forced trustees to breach the two-year limit on living overseas.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital