Compliance, Documentation, SMSF

Extended absence okay for control

SMSF central management and control Australian superannuation fund CMC

The central management and control test required for an SMSF can be satisfied even if trustees are located overseas for more than two years.

A technical manager has reminded practitioners trustees can still satisfy the central management and control requirement allowing an SMSF to be considered an Australian superannuation fund even if they leave the country for a period of more than two years.

Accurium head of education Mark Ellem acknowledged section 295-95(4) of the Income Tax Assessment Act 1997 specifies the central management and control of a superannuation fund is ordinarily in Australia at a time even if it is outside Australia for a period of under two years, but noted it is not absolute.

“It doesn’t restrict the meaning of ‘ordinarily in Australia’, which is what the requirement is, if you’re temporarily outside Australia for more than two years. It just means that this safe harbour subsection 4 doesn’t apply,” Ellem confirmed.

“If you can show that your absence from Australia is still temporary, even though it’s greater than two years, you will still be able to comply with the requirement that the central management and control is ordinarily in Australia.”

He pointed out the key concept is establishing the trustees’ absence from the country is only for a short period of time and said trustees must recognise the elements required to do this.

“The important [element is] the duration of the absence must either be defined in advance or related, both in intention and fact, to the fulfilment of a specific passing purpose,” he noted.

“So effectively we’ve got to determine that we’re going to be temporarily outside of Australia in advance or for a specific purpose.”

Ellem referred advisers to ATO Tax Ruling 2008/9, which contained examples of how a temporary absence can be established.

To this end, an agreed set employment term would serve the purpose, however, leaving the country for an indefinite period and in the process selling significant assets and terminating existing residential leases would not.

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