Australian SMSF trustees that live abroad should not face penalties or be forced to switch to an APRA-regulated fund, the SMSF Association has argued.
In a statement issued yesterday, SMSFA chief executive John Maroney highlighted the status quo for SMSF trustees living outside Australia, arguing that the current laws “effectively compel” people to switch out of their current fund.
“The definition of an Australian superannuation fund under the Income Tax Assessment Act means SMSF members who continue contributing to their fund while overseas face penalties as well as having it taxed as a non-complying fund,” the statement said.
“The effective consequence for many SMSF members is being forced to switch to an APRA-regulated fund while overseas and then transferring those contributions back to their SMSF on returning to Australia – a costly and cumbersome exercise.
“Aside from the fact it’s not members’ preference, it creates significant additional costs by having an extra superannuation fund and subsequently transferring the benefit to their SMSF. The end result is higher administrative and compliance costs, reducing the superannuation balance.”
SMSFA proposes removing the ‘active member test’ ensuring a fairer system for the SMSF sector.
“Removing the ‘active member’ test will ensure that SMSF members who are working overseas can still contribute to their fund where their SMSF balance exceeds 50 per cent of the fund’s assets,” the statement said.
“This will mean that, provided the fund was established in Australia and the central control and management remains in Australia, then an SMSF member can contribute to their fund of choice.”
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