Hi Lina

Following on from my comments above I also refer to SIS & another option.

Section 17A(3) of SIS states that other persons may be trustees and that:

"(b) the legal personal representative of a member of the fund is a trustee of the fund or a director of a body corporate that is the trustee of the fund, in place of the member, during any period when:

(i) the member of the fund is under a legal disability; or

(ii) the legal personal representative has an enduring power of attorney in respect of the member of the fund".

That is the above allows the non-residents to resign as a trustee or as a director of the trustee company. Under an enduring power of attorney they appoint an Australian based person to act as trustee or director of the trustee company on their behalf. The examples that I have been involved with over the years have done this.

Preferably specialist legal advice is sought by the trustees if they have concerns re the residency tests.

Thanks

SMSF AAA

Hi Lina

The residency rules & SMSF's are complicated.

In May 2021 the Government announced they were to relax the residency requirements for SMSF's but this has not been legislated yet.

A SMSF to meet the residency requirements has to comply with 3 rules:

1) Established in Australia.

2) Central control & management in Australia.

3) Active member test.

In relation to your query my view is that the central control & management test will be met if all the decisions in relation to the Fund are made by the trustee / member that remains in Australia whilst the other trustees are overseas. That is as long as the central management control remains in Australia they will not have to be removed as trustees. You should also check that the Fund's deed allows them to delegate their duties and powers when they are absent.

There is a tax ruling that provides guidance TR 2008/9 - Income tax: meaning of 'Australian superannuation fund' in subsection 295-95(2) of the Income Tax Assessment Act 1997.

It states:

"Location of the CM&C of the fund

27. 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).

When is the CM&C of the fund 'ordinarily' in Australia?

28. 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. It involves determining whether, in the ordinary course of events, the CM&C of the fund is regularly, usually or customarily exercised in Australia. There must be some element of continuity or permanence if the CM&C of the fund is to be regarded as being 'ordinarily' in Australia. If the CM&C of the fund is being temporarily exercised outside Australia, this will not prevent the CM&C of the fund being 'ordinarily' in Australia at a particular time."

Also a relavent example in the ruling is:

"Example 5(a) - person other than the trustees exercising CM&C of the fund whilst the trustees are overseas (delegation of trustee duties)

45. Henry and Eleanor are the trustees of their SMSF, the 'Plantagenet Family Superannuation Fund' which was established in New South Wales (NSW). The members of the Plantagenet Family Superannuation Fund are Henry and Eleanor.

46. On 29 September 2009, Henry and Eleanor travel to France to take up management of Eleanor's family business interests in Europe. They do not have an expected return date although they do intend to return to Australia at some point in the future. They take their children with them to France, and they move into Eleanor's family home. The children are enrolled in local schools in France. Henry and Eleanor return to Australia permanently on 22 September 2012.

47. Prior to moving overseas, Henry and Eleanor validly delegate to Richard, an Australian based resident, their trustees' duties. [9] The trust deed of the Plantagenet Family Superannuation Fund permits the delegation of all or any of the duties and powers of the trustee provided that the delegation is consistent with the requirements under the NSW trustee legislation. The activities delegated to Richard include:

•monitoring and reviewing the performance of the fund's investments,

•re-balancing the investment portfolio and

•altering the fund's investment strategy.[10]

48. During Henry and Eleanor's absence from Australia, Richard undertakes these activities without reference to Henry and Eleanor. Furthermore, Henry and Eleanor did not participate in any of these high level decision making activities whilst overseas.

49. In these circumstances, the CM&C of the Plantagenet Family Superannuation Fund continues to be ordinarily in Australia within the meaning of paragraph 295-95(2)(b) of the ITAA 1997 at all times by virtue of Richard exercising the CM&C in Australia during Henry and Eleanor's absence from Australia."

The active member rule will also have to be complied with and as per the ATO it is summarised as:

"The fund either has no active members or it has active members who are Australian residents and who hold at least 50% of either

• the total market value of the fund's assets attributable to super interests, or

• the sum of the amounts that would be payable to active members if they decided to leave the fund."

An active member is a member who receives a contribution or rollover in a year.

A non resident would not be able to make contributions or make a rollover to a SMSF if their balance exceeds 50% of the balance of all active members.

Thanks

SMSF AAA