How Moving Overseas Could Affect Your SMSF's Tax Status

Sonal Goyal

22 September 2026 05:41 PM AEST

How Moving Overseas Could Affect Your SMSF's Tax Status

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Why residency matters

To be a complying fund and receive concessional tax treatment, an SMSF must meet the definition of an Australian Superannuation fund at all relevant times. If it fails, it can become non-complying, with heavy tax consequences.

A fund that loses its complying status can be taxed at the highest marginal rate on its income and on a large part of its assets.

The three residency tests

An SMSF must satisfy three tests to be an Australian superannuation fund. First, the fund must have been established in Australia, or at least one of its Assets must be located in Australia. Second, the central management and control of the fund must ordinarily be in Australia. Third, the fund must meet the active member test.

All three must be satisfied, so failing any single test can affect the fund's Australian status, even if the other two are comfortably met.

Central management and control

Central management and control refers to the high-level strategic decisions of the fund, such as setting the Investment strategy and overseeing the fund, and it must ordinarily be in Australia.

The rules allow for temporary absences, provided the absence is genuinely temporary. What counts is substance rather than form: leaving an Australian postal address, or having an Australian co-trustee sign documents that were really decided abroad, will not satisfy the test if the genuine decision-making has moved overseas.

The active member test

The active member test looks at contributions. Broadly, the fund passes if it has no active members, or if at least 50 per cent of the fund's assets attributable to active members belong to members who are Australian tax residents.

Continuing to contribute to the fund while living overseas as a non-resident can cause the fund to Fail the test, particularly where the overseas member holds a large share of the balance.

Options for trustees moving overseas

Options include appointing a legal personal representative to exercise control in Australia, rolling benefits into an APRA-regulated fund before leaving, or restructuring the fund, with the appropriate approach depending on individual circumstances.

The government announced measures in the 2021-22 Budget to relax these rules, extending the central management and control safe harbour to five years and removing the active member test. As at September 2026, those measures have not been enacted, so the existing rules continue to apply.

A hypothetical example

Consider a hypothetical example. A Trustee accepts a three-year overseas posting. Before leaving, arrangements are put in place for the fund's control and contributions are paused, so the fund keeps its Australian status.

FAQs

Q: What are the three residency tests an SMSF must meet?

A:An SMSF must have been established in Australia (or hold an asset there), have its central management and control ordinarily in Australia, and meet the active member test.

Q: What is central management and control for an SMSF?

A:Central management and control refers to the high-level strategic decisions of the fund, such as setting the investment strategy, which must ordinarily occur in Australia.

Q: What does the active member test require?

A:The fund passes if it has no active members, or if at least 50 per cent of the fund's assets attributable to active members belong to Australian tax residents.

Q: Have the proposed 2021-22 Budget changes to SMSF residency rules been enacted?

A:As at September 2026, the proposed measures to extend the central management and control safe harbour and remove the active member test have not been enacted, so the existing rules continue to apply.

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