SMSF urges end of ‘active member’ test
The SMSF Association has urged the Government to lift restrictions that compel Australians living overseas to switch from their self-managed superannuation funds (SMSFs) to Australian Prudential Regulatory Authority (APRA)-regulated funds while abroad.
Under the Income Tax Assessment Act, super funds into which a non-resident pays more than 50 per cent of the contributions is not considered a complying Australian fund for tax purposes.
John Maroney, SMSF Association chief executive said that this ‘active member’ provision meant that SMSFs who contribute to their fund while overseas face penalties and risk having it taxed as a non-complying fund.
As a result, he said that SMSF members living abroad were being forced to open APRA-regulated funds while overseas and then switch back to their SMSF upon their return, which was “a costly and cumbersome exercise.”
Maroney called on the Government to dispense with the ‘active member’ test when determining whether a fund was Australian for tax purposes.
“Residency of the fund should be determined on the same principles as all other entities for income tax purposes; that is, the place of establishment and the location of the management and control of the entity,” he said.
“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.”
Maroney said that the ‘active member’ rule disproportionately impacted SMSFs, as the scale and membership size of large APRA-regulated funds made it “virtually impossible” for them to breach the 50 per cent test.
Recommended for you
The impact of identity theft and its threat to superannuation savings were highlighted in a case that went before the Federal Court at the end of 2023.
A recent NSW Supreme Court decision is an important reminder that while super funds may be subject to restrictive superannuation and tax laws, in essence they are still a trust and subject to equitable and common law claims, says a legal expert.
New research from the University of Adelaide has found SMSFs outperformed APRA funds by more than 4 per cent in 2021–22.
The SMSF Association has made a number of policy recommendations for the superannuation sector in its pre-budget submission to the government.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
215.17 3 y p.a(%)
2
Loftus Peak Global Disruption Fund Hedged
118.15 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
75.00 3 y p.a(%)
4
UBS Solactive Global Pure Gold Miners UCITS ETF Dis USD
61.11 3 y p.a(%)
5
Global X Ultra Long Nasdaq 100 Complex ETF
60.93 3 y p.a(%)
