What happens to my SMSF if I move overseas?

author-avatar By on October 08, 2021
What happens to my SMSF if I move overseas?

Self-managed super funds are handled a bit differently to regular superannuation when you move overseas. Find out what you need to do before saying bon voyage.

Superannuation is arguably the most 'sticky' of financial categories you’ll need to take care of before you leave Australian shores. It’s not like a bank account where you can just close it down - superannuation stays with you for life… or at least until preservation age. Self-managed super funds (SMSFs) also carry with them an additional subset of considerations. Here's what you need to look at with your SMSF before you move overseas.


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Looking to take control of your retirement? This table below features SMSF loans with some of the most competitive interest rates on the market.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
SELF MANAGED SUPER FUND LOAN

SMSF 80

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
SELF MANAGED SUPER FUND LOAN

SMSF 80

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
FixedMore details

SMSF 80 Fixed 5 Years (Purchase) (New Customer)

VariableMore details

Liberty SuperCredit SMSF (LVR < 60%)

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given Rates correct as of October 19, 2021. View disclaimer.

SMSFs and Moving Overseas - What Should I Consider?

If you’re moving overseas but still considered an Australian resident for tax purposes, you’ll need to make sure your SMSF is still ‘Australian’ to receive tax concessions i.e. taxed at 15% in the accumulation phase. Not doing so means your SMSF will be taxed at the highest marginal rate.

See Also: Your Financial Checklist When Moving Overseas

Maintaining Australian ownership of your SMSF

The Australian Tax Office (ATO) has three main points of criteria SMSFs should meet to satisfy its residency conditions:

  • The fund is established in Australia, or at least one of its assets is located in Australia (for example, a property located in Sydney).

  • Central management and control of the fund is ‘ordinarily’ in Australia. Your fund will generally still meet this requirement if management/control is overseas for up to two years.

  • The fund either has no active members or has active members who are Australian residents who hold at least 50% of either:

    • 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.

The second point is arguably most pertinent if you are thinking of moving overseas. If you’re moving overseas for a short period under two years - say for a work contract, working holiday or as a huge trip - you likely needn’t worry. However, if you’re thinking of leaving for a longer period, this is where things could get tricky.

Options for your SMSF when moving overseas long-term

Unless you enjoy paying extra tax, you’ll need to do a few things to your SMSF should you move outside of Australia for more than two years. There are a few things to consider.

Australian-based trustee

An SMSF member travelling overseas can maintain eligibility by appointing a trustee to manage their SMSF, if they have ‘enduring power of attorney’ (EPOA). If you’re heading overseas for more than two years, this could be an option but you’ll need to relinquish control to a trusted third party.

To maintain the ‘50% rule' listed above, you’ll likely also need to stop making contributions to your SMSF when you are overseas, if you’re in a two-person fund. The ATO recommends this here. Be aware, also, of providing ‘advice’ or investment direction to your trustee - this could breach the rules, too.

Wind up

If you’re not prepared to hand over your SMSF investment direction to a trustee, you might want to consider winding up the fund entirely. This could especially be the case if your spouse is also in the SMSF and you are both moving overseas. There are generally two options here:

  • Large fund: You could roll up your investments into a regular, large super fund, but you’ll need to sell or transfer your assets first, such as real estate, shares and other investments. This may also trigger capital gains tax (CGT), but you could avoid this if the fund is paying retirement-phase pensions (i.e. if you’re moving overseas in retirement).

  • Small APRA fund (SAF): A SAF can have a maximum of four members, and they are run by a licensed trustee. This removes trustee stress, but could be expensive as you’re paying that person to run your fund. You’ll also still run into the ‘active member’ problem, so you’ll need to stop making contributions.

Winding up your SMSF and converting into either one of these options could mean less stress when you’re moving overseas. On top of everything else, the last thing you want to worry about is your retirement fund.

SMSFs: maintaining Australian residency vs ditching residency

No matter how you skin it, if you’re earning some sort of income in Australia, you’ll need to do a tax return. If you ditch your Australian residency and continue with your SMSF, earning income and capital gains, you’ll likely be hit with the non-residents' tax rate.

The non-residents' tax rate is steeper than it is for residents, and there is no tax-free threshold. Further, if you’re a non-resident and holding onto an SMSF, you might be in a ‘non-complying’ fund, and will have to give up the favourable tax rate of 15% in the accumulation phase. If you’re ceasing to be an Australian resident, it might be easier to wind up your SMSF.

SMSFs and moving to New Zealand

The relationship between Australia and New Zealand generally makes it easier to organise your financials when moving there than it does with other countries. However, unfortunately this is generally not the case for SMSFs - the same restrictions mentioned above still apply.

With regular superannuation, you can generally move your APRA fund’s amount to a New Zealand ‘KiwiSaver’ account. If you’re moving permanently to the land of the long white cloud, you’ll need an Inland Revenue Department (IRD) number to do so, but after that, it’s pretty simple. 

Non-complying SMSF penalties

If you’re moving overseas for more than two years and still an active trustee of your SMSF, you run the risk of being non-compliant. This means you could be shifted off the concessional tax rate of 15% in the accumulation phase, plus face any administrative penalties handed down by the ATO.

Penalties are generally handed down in blocks of units, typically between 5-60 units. One unit equals a penalty of $222 at the time of writing, and can change periodically.

Say you’re in breach of SMSF compliance and charged ten units, you could be out of pocket $2,220. This must come out of your savings and not out of your SMSF. 

Savings.com.au's two cents

SMSFs and excess paperwork. Name a more iconic duo - I’ll wait. Unfortunately, moving overseas doesn’t rid you of paperwork if you self-manage your super fund - in fact it might just do the opposite! Generally speaking, your SMSF needs to be considered ‘Australian’ to be tax compliant, otherwise you’ll be slugged with penalties. If you’re moving overseas for two years or less, you might be okay, but any longer than that, and there’s additional hoops you need to jump through. If you’re thinking about dusting off the passport for an extended move overseas, it pays to talk to a solicitor, financial adviser or accountant in regards to your SMSF.

Article first published 27 October 2020, last updated 8 October 2021.


Photo by Matt Artz on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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