The SMSF Association has called on the Government to lift legislative restrictions that effectively require Australians with self-managed superannuation funds (SMSFs) who are temporarily living abroad to switch to an Australian Prudential Regulation Authority (APRA)-regulated fund.
The Income Tax Assessment Act imposes an ‘active member’ test requiring that contributions made to the fund by non-resident active members for tax purposes cannot exceed 50 per cent.
This means that SMSF members who contribute to their fund while overseas risk penalties and having it taxed as a non-complying fund.
John Maroney, SMSF Association chief executive said that this effectively required SMSF members to switch to an APRA-regulated fund while overseas and then transfer the contributions back to their fund upon return to Australia.
He said that this was “a costly and cumbersome exercise” with an “end result of higher administrative and compliance costs, reducing the superannuation balance.”
Maroney also pointed out that the Income Tax Assessment Act provisions impact principally SMSFs and small APRA funds, as it is “virtually impossible” for larger retail and industry funds to breach the 50 per cent test due to their large memberships.
He urged the Government to exclude the ‘active member’ test from the requirement for any super fund to qualify for tax concessions under the income tax law.