Moving Abroad? SMSF Residency Rules for Non-Residents

Worldwide Advisory
5 days ago
3 min read

For many expats, an SMSF is a great way to keep control over their retirement savings while living overseas. However, the Australian Taxation Office (ATO) has strict rules to ensure that tax-concessional super funds remain truly "Australian."

To keep your fund’s complying status (and its 15% tax rate), it must pass three residency tests at all times.

1. The Establishment Test

This is the easiest one to pass. The fund must have been established in Australia, or at least one of its assets must be located here. If you set up your fund while living in Australia, you’ve likely already ticked this box.

2. The Central Management and Control (CMC) Test

This is where most expats get into trouble. The "strategic" decisions of the fund—like setting investment strategies or deciding on pension payments—must happen in Australia.

The 2-Year Rule: Usually, the ATO allows for a "temporary absence" of up to two years. If you are away longer, the CMC is technically no longer in Australia.
The "Strategic" Distinction: Day-to-day administration (paying an accountant or checking a bank balance) can happen anywhere. But high-level decision-making must stay on Australian soil.
The Solution: Many trustees appoint an Enduring Power of Attorney (EPOA). This person (usually a trusted friend or family member in Australia) becomes the trustee in your place while you are abroad, keeping the CMC in Australia.

3. The Active Member Test

This test ensures that the fund isn't being used by non-residents to "hoard" tax-free wealth. A member is "active" if they are making contributions or rollovers into the fund.

To pass this test:

The fund must have no active members, OR
At least 50% of the total market value held by active members must belong to Australian tax residents.

Top Tip: If you are a non-resident, the safest move is often to stop all contributions to your SMSF. If you still want to contribute, consider using a public retail fund while abroad and rolling the balance into your SMSF once you return.

The "Death Tax": What Happens if You Fail?

If your fund fails any of these tests, it becomes non-complying. The consequences are immediate and severe:

Asset Grab: The market value of the fund's assets (minus any non-concessional contributions) is taxed at 47% in the first year of non-compliance.
Income Tax: All future income earned by the fund is taxed at 47% instead of the usual 15%.

Strategic Options for Non-Residents

If you are moving overseas indefinitely, you generally have three paths:

Appoint an Attorney: Hand over the trustee role to a resident in Australia via an EPOA.
Convert to a Small APRA Fund (SAF): You keep your assets, but a professional licensed trustee takes over the legal responsibility. This removes the residency headache but adds management fees.
Wind Up the Fund: Roll your balance into a large industry or retail fund. These funds are professionally managed and aren't subject to the same residency tests for individual members.

Important Disclaimer

Tax Advice Only The information provided in this blog is for general information purposes only and constitutes taxation advice under the Tax Agent Services Act 2009. It relates specifically to the interpretation of Australian taxation laws and their application to Self-Managed Superannuation Funds (SMSFs) in the context of residency status.

No Financial Product Advice We do not hold an Australian Financial Services Licence (AFSL). The content of this website does not constitute financial product advice. It has been prepared without taking into account your personal objectives, financial situation, or needs.

Before making any decision regarding your SMSF, including whether to establish, maintain, or wind up a fund, you should:

Seek independent financial advice from a licensed Financial Planner or specialized SMSF adviser.
Read the relevant Product Disclosure Statement (PDS) and any other offer documents.
Consider whether the information is appropriate for your specific circumstances.

While we strive to ensure the accuracy of the tax information provided, laws and ATO interpretations are subject to change. We recommend a formal consultation to address your specific residency and compliance requirements.