Hi,
My husband and I have been living overseas for the last 3 years. prior we left, we established a SMSF. just a few months ago, we were told by our accountant that if we don't come back to oz to live, then our SMSF will lose it's australian tax resident status. So we actually sold out our IP in the SMSF, and were going to move the lot to a big managed fund.
The benefit of a australian tax resident is that, we can have all the tax advantages, e.g. concession of tax, CGT, etc. for a non tax resident, I believed it was taxed at 33% for all its incomes.
But now that with the new super fund law change, SMSF can negatively gear a IP, it appears that it made no difference to us whether the SMSF has an australian tax resident status or not, as it will not have to pay income tax, as long as the IP is negatively geared.
Am I thinking along the right line? Is there any accountant you can recommend so I can get some clear definitions?
Thanks a lot!!
Non-residents are taxed at higher rates than Aussie residents – and residency for tax is determined in a different manner to that of immigration. But SMSF is a complex area of law so I am not sure how it works, but if the trust is not making a profit, then it possibly wouldn't matter too much with the important part being whether you are residents when the profit is made (on sale?). But there may be many rules on carrying losses forward etc.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Rebecca
From Oct 1 2001 a Trustee can spend upto 2 years overseas without causing the fund to fail the central management and contol residency test.
Where a Trustee returns to Australia for a period of more than 28 days before returning overseas the 2 year period will restart.
Where a fund loses its complying status by either failing the Compliance test or by becoming a non resident it wil have its income, including contributions received and earnings within the funds taxed at 47% in the year it became non- complying.
Richard Taylor | Australia's leading private lender
Hello Richard
"Where a fund loses its complying status by either failing the Compliance test or by becoming a non resident it wil have its income, including contributions received and earnings within the funds taxed at 47% in the year it became non- complying"
I have heard that it is possible to get around this (i.e. if you are overseas) by having a resident trustee but that you have to be able to show that they have real control. Have you heard of this? What I don't know is whether this "other" trustee has to be a beneficiary of the SMSF too. Any information you have in this area would be very helpful.
Does the 28 day rule every 2 years only apply if you have retained your Oz residency for tax purposes or is it also applicable if you are a true and long term non resident (but an Australian citizen)?
Thank you
ElkaHi Elka
You are correct if one of the Trustees is based as resident in Australia and can demonstrate that they have control of the investment decisions of the fund then that is acceptable.
As far as I am aware as long as your are a resident then the 28 day rule applies.
Richard Taylor | Australia's leading private lender
Hello Richard
Do all trustees have to be beneficiaries or can you for example have your FA or accountant as a trustee or maybe a relative with POA.
You're a walking encyclopedia in areas of finance and investing Richard.
Thank you
ElkaHi Elka
No sure about the encyclopedia bit but thanks anyway.
Section 17A of the SISS must be satisfied for the SMSF to comply. This section requires that :
1) Each member must be a Trustee or if the Trustee is a Company each member must be a Director of the Company.
2) A person who is not a Member may not be a Trustee or a Director of a Company which is a Trustee:
There are very limited exceptions for Legal Personal Representatives to become Trustees however the LPR would require authorisation from the Regulator. They would also need to be a Director of the Company.
I thinkit would be a tough to expect your Lawyer to take control of the SMSF and secondly be tought to get the Regulator to approve his appointment especially where it was deemed he was appointed to avoid the non residency requirements.
Not saying it couldnt happen just wouldnt fancy your chances.
Richard Taylor | Australia's leading private lender
Thank you Richard.
Bummer!!! But all is not yet lost.
I have a sister in Oz who is also my beneficiary so there may be something I can do with her if it's possible to be a member of two SMSF's.
Hello Rebecca
Sorry. I did not mean to hijack your thread but thought that the answers would be useful to your situation too.
Will keep thinking.Elka
If you can have super in a number of public offer funds there should be no reason or obstacle stopping you from being a director or more than one complying SMSF – probably worth more investigation.
Hi Rebecca,
A strategy I have implemented for clients overseas with a SMSF is to appoint an enduring power of attorney (usually a resident family member or sibling), this goes towards satisfying the central control and management issue. Please be advised that there are other conditions that you would be required to satisfy in order for your SMSF to maintain it's complying status.Please also be advised that the 28 day rule no longer exists, it hasn't been since the rewrite of the legislation in July 2007.
There is also no requirement that a legal personal representative/power of attorney be approved by the regulator.Cheers
THanks very much Ross and Richard! appreciate very much for all your advices!
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