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A complying superannuation fund enjoys concessional taxation treatment if it can be proved to be a resident superannuation fund (an Australian superannuation fund) at all times during the income year.

There are three requirements when establishing residency, each must be met.
  1. The fund was established in Australia, or any asset of the fund is situated in Australia at that time. If the fund was established in Australia then it will always satisfy this requirement regardless of whether or not an asset of the fund is situated in Australia. In cases where the fund was not established in Australia, at least one asset of the fund must be situated in Australia at the relevant time.
  2. The central management and control of the fund is ordinarily in Australia. Trustees (or directors if a corporate trustee) must perform the high level duties associated with central management and control. These include:
    • formation and decision making relating to the investment strategy of the fund
    • the review, monitoring and updating of the investment strategy of the fund
    • the decision to pay fund benefits to a member, and
    • the review and monitoring of fund advisers such as accountants, auditors or financial advisers.
  3. At the time in question, there are no active members or, at least 50 per cent of:
    • the total market value of the fund’s assets attributable to superannuation interests are 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
    An active member is a contributor to the fund at the time in question or an individual for whom contributions have been made.
If the fund is unable to satisfy these requirements it may become non-complying and its total assets (less any member contributions for which no tax deduction has been claimed) subject to tax at the highest marginal tax rate. Any income earned during that year will also be taxed at that rate.

How it works
Joe and Julie live in Brisbane and establish their own superannuation fund, drafting an investment strategy. Their financial adviser considers all the relevant information and recommends alternate asset allocation strategies based on possible retirement dates and the level of contribution. As trustees, Joe and Julie consider their adviser’s recommendations before finalising the strategy at a trustee meeting.

Joe and Julie have satisfied the first requirement for a resident superannuation fund as the fund was established in Australia, and by considering their adviser’s advice but making their own decisions regarding investment strategy they have also satisfied the requirement regarding central management and control. As all assets within the fund are attributable to either Joe or Julie, the third requirement regarding active membership is also complied with and their fund will enjoy concessional taxation status.

If Joe and Julie were to temporarily relocate overseas for a period of time less than two years they are still able to meet central management and control requirements. However if they relocate permanently they will no longer do so, even if they return to Australia unexpectedly. The duration of an absence must be either defined in advance or related to the fulfilment of a specific and passing purpose.

Disclaimer: The information contained in this document is given in good faith and has been prepared from information believed to be accurate and reliable. This information is of general nature only and based on Multiport’s interpretation of the present laws but no guarantee is provided. This document is not designed to be a substitute for financial or investment advice and should not be relied upon as such. Reproduction of material in this document is only permitted with approval of the author.
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