Global Pensions Group - Knowledge Bank - Trustees of Australian SMSF living abroad take notice

Knowledge Bank

Trustees of Australian SMSF living abroad take notice

The Commissioner has issued a recent ruling (TR 2008/9) which sets out his interpretation of the definition of “Australian superannuation fund” and in particular the “central management and control” (CM&C) test.

There are three tests that a fund must satisfy at the same time for it to be treated as an Australian superannuation fund. The three tests are:

the fund was established in Australia, or any asset of the fund is situated in Australia at that time; and
at that time, the CM&C of the fund is ordinarily in Australia; and
at that time either the fund has no active members or at least 50% of:
the total market value of the fund’s assets attributable to superannuation interests held by active members; or
the sum of the amounts that would be payable to or in respect of active members if they voluntarily ceased to be members
is attributable to superannuation interests held by active members who are Australian residents.

If a fund fails to satisfy any one of the tests at a particular time, then it is not an Australian superannuation fund at that time. This could result in the loss of complying status and concessional tax treatment for the fund.

We will focus on the second test regarding the CM&C of the fund in this article.

The CM&C of a fund involves a focus on the who, when and where of the strategic and high level decision making processes and activities of the fund. The strategic and high level decision making processes include:

formulating the investment strategy for the fund;
reviewing and updating or varying the fund’s investment strategy as well as monitoring and reviewing the performance of the fund’s investments; and
determining how the assets of the fund are to be used to fund member benefits.

The other principal areas of operation of a superannuation fund that form part of the day-to-day or operational side of the fund’s activities will not constitute CM&C.

It is the trustee or trustees of the fund that have the legal responsibility or duty to exercise the CM&C of the fund. There may be situations where a person other than the trustee is exercising the CM&C of the fund. For example, the trustee may delegate their duties and powers to that person. If a person other than the trustee of the fund independently and without influence from the trustee performs those duties and activities that constitute the CM&C of the fund, that person is exercising the CM&C of the fund.

The trustee of the fund may seek external advice relating to the performance of their high level duties and activities. Provided the trustee in fact makes the strategic and high level decisions for the fund, the circumstance that the trustee acts on or is influenced by such advice does not affect the fact that the trustee is exercising the CM&C of the fund.

The location of the CM&C of the fund is determined by where the high level and strategic decisions of the fund are made and high level duties and activities are performed, regardless of where the persons exercising the CM&C of the fund reside.

Whether the CM&C of a fund is ordinarily in Australia at a particular time is to be determined by the relevant facts and circumstances of each case. Australians ceasing tax residency of Australia and who are trustees of a self managed superannuation fund should seek appropriate advice to ensure their self managed superannuation fund does not lose its complying status and concessional tax treatment.

This information has been prepared in good faith, is in the nature of general comment only, and neither purports, nor is intended, to be advice on any particular matter. You should not act or rely upon any matter or information contained in or implied without taking appropriate professional advice which relates specifically to your particular circumstances. The authors and consultants expressly disclaim all and any liability to any person (whether a reader or not) who acts or fails to act as a consequence of reliance upon the whole or any part of this information.