Phone: (03) 9563 4688

Email: office@aubreypaton.com.au

Address: 17D Chester Street, Oakleigh VIC 3166

find:
Hot Issues
Tax Time Checklists- Individual, Company, Trust, Partnership and Super Funds
SMSFs - Our 'hardest' jobs
Tax Office reveals adventurous, dubious claims ahead of tax time
ATO reveals top tax time mistakes, set to contact 1 million taxpayers
Watch out for charges with incoming GST laws.
Super savings gap for women stuck at 30%
‘Wipe the slate clean’: Clients, accountants urged to use new amnesty period
Statistics for all Australians
Touch Payroll (STP)
‘Calm before the storm’: Government proposes 12-month SG amnesty
Government intensifies cash payments crackdown - Kelly O'Dwyer
Passive investment companies tax rate still 30%
Cryptocurrency audits tipped to increase this EOFY
Australia by numbers – Update
$2.4m lost to tax scams, ACCC reports
No GST on digital currency
Federal Budget 2018 - Overview
Your Budget
4 components of our 2018 Federal Budget
Resources to help understand and implement Single Touch Payroll (STP)
New rules capture SMSFs trading big with cryptocurrency
New passive income test for lower corporate tax rate
Tools to help you manage your financial position are available on our site.
‘A simple mistake can attract our attention’: ATO reminder about FBT slips-ups
Australia by numbers – Update
Beware residency rules if moving overseas
Meaningful tax reform in high demand
Working holidaymakers and tax returns
Articles archive
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 4 October - December 2007
Quarter 3 July - September 2007
Quarter 2 April - June 2007
Quarter 1 January - March 2007
Quarter 4 October - December 2006
Quarter 3 July - September 2006
Quarter 2 April - June 2006
Quarter 1 January - March 2006
Quarter 4 October - December 2005
Quarter 3 July - September 2005
Quarter 2 April - June 2005
Quarter 1 January - March 2005
Quarter 4 October - December 2004
Quarter 3 July - September 2004
Quarter 2 April - June 2004
Quarter 1 January - March 2004
Quarter 4 October - December 2003
Quarter 3 July - September 2003
Quarter 2 April - June 2003
Quarter 1 January - March 2003
Quarter 4 October - December 2002
Quarter 3 July - September 2002
Quarter 2 April - June 2002
Quarter 1 January - March 2002
Quarter 4 October - December 2001
Beware residency rules if moving overseas

SMSF trustees are often unaware that if they move overseas for an extended period of time, their SMSF may fall foul of the ATO’s residency rules and they may face a heavy tax bill.




     


In order to satisfy the residency rules, SMSFs must meet three conditions:


  1. It was established in Australia, or at least one of its assets is located in Australia.
  2. The central management and control of the fund is ordinarily in Australia.
  3. It either has no active members or it has active members who are Australian residents and who hold at least 50 per cent of:


  • the total market value of the fund’s assets attributable to super assets, or
  • the amounts that would be payable to active members if they leave the fund.

Generally speaking, the first condition is readily satisfied, but the other two can cause problems if members move overseas for a period of time, usually defined as over two years.


If these conditions aren’t met, then the fund can lose its complying status, which has significant tax implications. They include:


  • taxing assessable income of the SMSF at 47 per cent (or 45 per cent for income years before 2014/15), and
  • a one-off additional tax bill in the year that it becomes non-complying that would result in the fund losing almost half its assets.

So what are the options for SMSF trustees and members who are considering moving overseas temporarily or taking an extended trip?


If trustees know they will be away for more than two years, or even if they are planning a shorter trip but it may end up being permanent, they should take steps to protect their superannuation before heading off.


This could involve transferring their benefits to a public offer fund and winding up their SMSF.


Alternatively, if they want to keep their SMSF running, but do not currently have at least 50 per cent of trustees living in Australia to manage and control the fund, they should appoint additional resident trustees/members to the SMSF, for instance adult children.


They could also appoint a resident enduring power of attorney to act as SMSF trustee on their behalf while they are away. Or, if they have a corporate trustee, they could appoint an alternate director to act as trustee director in their absence.


The main difference between an alternate director and an enduring power of attorney is that the power of attorney can continue acting on behalf of the member in the event of their incapacity. However, the role of alternate director will cease if the trustee is incapacitated, that is, the role of director ceases.


They should also take steps to ensure the ‘active member’ condition is satisfied. Active members are those who are making contributions or rollovers to the SMSF. Therefore, even if the central management and control test is met, if an overseas SMSF member contributes to the fund, then the SMSF will become non-complying if the overseas members combined hold more than 50 per cent of the SMSF’s assets.


Contributions or rollovers for these overseas members can instead be made to a local public offer, retail or industry fund while overseas and then they can choose to transfer these benefits into their SMSF when they return to Australia.


In most cases, the best approach is for all members, local and overseas, to avoid making contributions or benefit rollovers to the fund while a fund member is overseas for an extended period.


While these steps are relatively straightforward, they need to be put in place before moving overseas. Therefore, SMSF trustees and members should ensure they talk with their advisers before undertaking any overseas moves.


Andrew Yee is director of superannuation and SMSF specialist at HLB Mann Judd Sydney.




By Andrew Yee
12 Apr 2018
www.smsmagazine.com.au





11th-May-2018