ATO ruling sheds light on residency rules confusion

A recent private binding ruling (PBR) has shed some light on an area of confusion in the SMSF sector regarding the SMSF residency rules.

A PBR released last week asked the question: Does the fact that an Australian superannuation fund pays a pension to a non-resident member jeopardise the fund’s residency status?

The ruling confirms that as long as three “important” tests are met, the fund will remain an Australian superannuation fund and will not lose that status just because it pays a pension to a non-resident member, said principal of Townsends Business & Corporate Lawyers, Peter Townsend.

The tests are that the fund was set up in Australia or has Australian assets; the fund’s central management and control are in Australia; and the fund passes the so-called 'active member' test.

Speaking to SMSF Adviser, Mr Townsend said the residency rules are a persistent area of confusion in the SMSF industry.

“This PBR is really just guidance as to how the ATO thinks, it’s only binding on them as far as this particular incidence is concerned. However, we do look at these things as a methodology for seeing how the tax office is thinking about these sort of issues,” Mr Townsend added.

For more from Peter Townsend on complying with the residency rules, see his blogResidency and SMSFs: the key compliance tests’

 

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