2 year residency rule: Keeping SMSF in Australia & being compliant?

[lilnut]

** If I have posted this in the incorrect sub category, forum admins, could you please move it to the right area?? **

Hi All,
I’ve only stumbled across the site to be honest and reading what I can, although, with not much success on my particular questions, perhaps not entering in the correct search strings?

My husband and I are in our early 40’s / late 30’s and new to the SMSF world with having just set up our own super fund (esuperfund). Our amount is around 100K at present and recently he was made redundant (ugh - global restructuring!!). I’ve been the home maker for the last 4 years with our 4 children and rolled up all my super into our SMSF (as well as he) – of which we are on close to equal standings.

There are a few scenarios we are considering given my husbands redundancy and one of those is to relocate to his home country for an indefinite amount of time (CA).

I’ve been finding out through my research that there are ‘residency compliance rules’ (bloody hell to put it politely!) such as CM&C decisions, having 1 investment in Australia and some thing else that alludes me right now in order for the ATO to deem our fund to be compliant.

Whilst I understand no advice can be given... but on the off chance of ‘hypothetical’ scenarios / suggestions....from those who perhaps have gone through something similar/considering it/or know of others/or are experienced in this area (???) .... I would appreciate some of your thoughts....

So my questions are:

1. Is there any way, and without transferring our SMSF to an APRA fund, to still be able to keep our SMSF in Australia if and when the time came for us moving overseas?

2. For example, I’ve read that we could add other trustees that reside in Australia to our fund and have them manage the fund as active contributors and have them make all the CM&C decisions etc... therefore being able to keep our fund compliant – is this a correct observation and how is this different from an envoked 'power of attorney'?

3. We'd still like to be able to add to our fund even though we would be overseas, however the tax office do not allow this - anyone have any thoughts on a work-around there?

4. From my research, SMSFs have increased in numbers considerably over the last few years, surely we as a whole group can add some pressure to the ATO to get a bit realistic eh?

5. I know my next comment may be laughable but after being a fully fledged tax payer for almost 25 years AND before I was made redundant with my last employer, as a family we receive a miniscule portion from the aust govt classed as ‘family tax benefit A and/or B’ .... does anyone have any advice in relation to spousal contributions, I’m considering contributing a portion of our ‘family tax benefit’ that we receive from the Aus Govt into our SMSF while my husband is out of work – any recourse/tax implications/problems with doing this? (I thought it was a great idea - the govt contributing to our SMSF!! )

I am cognisant of seeking our own advice etc, however... I’m not too sure if I have worded things correctly above as I am new to our SMSF and getting my head around ALOT of the terminology/acronyms etc...

I'm not at all about screwing the 'system', however our Super money is just that - ours...

... Any thoughts/comments/opinions/constructive criticisms would be REALLY appreciated...:-D


Thanks,
Lilnut

 

[StumpyPhantom]

Hi Little Nuts (does your husband agree to you using his nicname?)

These FAQ is from the ATO site:

http://superfundlookup.gov.au/Faq.aspx

And this from one of the commercial sites:

http://www.smartsuper.com.au/individuals/index.html

1. Self Managed Superfund (SMSF)
Self Managed Superfunds are regulated by the ATO and are the most common type used due to their improved flexibility. A Self Managed Superfund must have 4 members or less, and every member must be either a trustee or a director of the Trustee Company. All members are required to sign off on all actions of the fund. Note: SMSF's are suitable for all individuals except those under a legal disability or those choosing to live overseas for extended periods.

GOOD LUCK!

Stumpy Phantom

 

[lilnut]

lol stumpy phantom, you know your 'screen name' could also be interpreted as 'stumpy'... aka the stump, and 'phantom' being 'something' that may exist, or not!!

interpreted to "stumpy the stump that may not exist"!?!?!?!?!?

if you are referring in the context of my husband agreeing to me using 'his' nic (which I am not), the nic is more a cutesy (blah) euphemism that we call our kids if truth be told - LMAO, i'll look into those links you posted though pppp (don't know how many 'rasberries' I can blow you) ....

Lilnut

Hi Little Nuts (does your husband agree to you using his nicname?)

These FAQ is from the ATO site:

http://superfundlookup.gov.au/Faq.aspx

And this from one of the commercial sites:

http://www.smartsuper.com.au/individuals/index.html

1. Self Managed Superfund (SMSF)
Self Managed Superfunds are regulated by the ATO and are the most common type used due to their improved flexibility. A Self Managed Superfund must have 4 members or less, and every member must be either a trustee or a director of the Trustee Company. All members are required to sign off on all actions of the fund. Note: SMSF's are suitable for all individuals except those under a legal disability or those choosing to live overseas for extended periods.

GOOD LUCK!

Stumpy Phantom

 

[hangseng]

So my questions are:

1. Is there any way, and without transferring our SMSF to an APRA fund, to still be able to keep our SMSF in Australia if and when the time came for us moving overseas?

Yes but you must maintain "Central Management and Control" (CMC) in Aus - See 2

2. For example, I’ve read that we could add other trustees that reside in Australia to our fund and have them manage the fund as active contributors and have them make all the CM&C decisions etc... therefore being able to keep our fund compliant – is this a correct observation and how is this different from an envoked 'power of attorney'?

2.a You can't make contributions as a non-resident unless at least 50% of the fund is that of an Australian Resident. And only then can that person contribute, the non resident can't.

2.b To maintain CMC you can appoint residents as trustees and they must have an "enduring power of attorney" over your rights as a trustee. They then MUST maintain CMC in Aus and have a minimum of two resident Trustees.
If you don't do this you must transfer to a compliant fund manager or the fund will be regarded as non-compliant and the fund will be taxed on ALL assets at 48.5%...i.e you will wipe out half of your fund.

3. We'd still like to be able to add to our fund even though we would be overseas, however the tax office do not allow this - anyone have any thoughts on a work-around there?

You can't make contributions as a non-resident, see 2.b above.

4. From my research, SMSFs have increased in numbers considerably over the last few years, surely we as a whole group can add some pressure to the ATO to get a bit realistic eh?

Good luck

5. I know my next comment may be laughable but after being a fully fledged tax payer for almost 25 years AND before I was made redundant with my last employer, as a family we receive a miniscule portion from the aust govt classed as ‘family tax benefit A and/or B’ .... does anyone have any advice in relation to spousal contributions, I’m considering contributing a portion of our ‘family tax benefit’ that we receive from the Aus Govt into our SMSF while my husband is out of work – any recourse/tax implications/problems with doing this? (I thought it was a great idea - the govt contributing to our SMSF!!

See 2.b above, spouse must be a resident and have at least 50% of the fund attributable to the spouse, i.e. they put the money in BEFORE you became a non-resident.

I'm not at all about screwing the 'system', however our Super money is just that - ours...

To quote the ATO "it is not yours, it belongs to the trust. It doesn't become yours until you retire and the trust is wound up.

Hints:

* NEVER treat the funds assets as "yours", you will end up in strife. DO manage the funds wisely as one day they will become yours...if the funds trustees manage within the rules.
*Don't ever mix up your personal funds and the trusts funds.
* Don't ever buy or lease personal assets from yourself with SMSF funds.
* The fund can lease a business asset that you are a director of.
* Don't make contributions to the fund as a non-resident, the fund will be regarded as non-compliant and the fund will be taxed on ALL assets at 48.5%...i.e you will wipe out half of your fund.


I am an expat non-resident with an SMSF. My rights as a trustee were transferred by Enduring Power of Attorney to my daughter who was appointed as a Trustee.

CMC is maintained in Australia and I don't make contributions for me or my spouse (she only has 5% of the fund). The fund has grown over 130% in 4 years and is not in the hands of an APRA fund manager.

This isn't advice to you but it is food for thought. if you are of reitrement age, you could wind up the fund and retire, then use the funds to invest in Australian equities. Investing in (non property) Aus equities from overseas as a non-resident no tax is payable. This is far better than having money strictly tied up in restrictive super legislation and then taxed annually. You can only do this though if you retire completely from the workforce and remain a non-resident. I am looking at this right now and know of a few here that are doing just that very successfully.

I learnt this the hard way and came close to being non-compliant. I found most Aus accountants were lost completely once the rules on non-resident taxation changed. One charging me over $2,000 for telling me what I had told him, i.e. I already knew more than he did and I was obviously paying him to learn the new rules, because he simply didn't know. So if you get an accountant, make sure they KNOW the new legislation on non-resident status as it relates to both income tax and SMSF, very few I found knew both.

Hope this helps.

 

[CanOz]

Interesting thread.

I too have a Super that i want to self manage. My wife is Australian, but also a non resident. Being a non resident, it looks like i can change it to a SMSF?

CanOz

 

[Des P]

All not trying to push any company but look in to smats they deal with a heck of a lot of Australian Non residents world wide
Cheers
Des

 

[StumpyPhantom]

lol stumpy phantom, you know your 'screen name' could also be interpreted as 'stumpy'... aka the stump, and 'phantom' being 'something' that may exist, or not!!

interpreted to "stumpy the stump that may not exist"!?!?!?!?!?

if you are referring in the context of my husband agreeing to me using 'his' nic (which I am not), the nic is more a cutesy (blah) euphemism that we call our kids if truth be told - LMAO, i'll look into those links you posted though pppp (don't know how many 'rasberries' I can blow you) ....

Lilnut

Good to see you keeping up the sense of humour in complex and diificult times. Redundancies are difficult at the best of times, so chin up! And good luck with it all, including the overseas adventure.

So far as my screen name is concerned, I'll have to get back to my 2 teenage kids with the mystical interpretation and come up with a new one...!!!

 

[McLovin]

2.a You can't make contributions as a non-resident unless at least 50% of the fund is that of an Australian Resident. And only then can that person contribute, the non resident can't.

2.b To maintain CMC you can appoint residents as trustees and they must have an "enduring power of attorney" over your rights as a trustee. They then MUST maintain CMC in Aus and have a minimum of two resident Trustees.
If you don't do this you must transfer to a compliant fund manager or the fund will be regarded as non-compliant and the fund will be taxed on ALL assets at 48.5%...i.e you will wipe out half of your fund.

Hi

Does this still apply? From my reading 50% of the SMSF must be "owned" by residents and a majority of members must also be resident. With a corporate trustee, would a non-resident need to resign his/her position as director (which would obviously create another issue!) or can they remain a director as long as the majority of directors are resident?

Thanks