What Happens to My SMSF If I Move Overseas?

Moving overseas when you have an SMSF can be complicated. An SMSF must comply with all three residency rules at all times to remain an SMSF. Failing any one of the three rules means your fund stops being a complying Australian superannuation fund and loses its tax concessions, as well as incurring a one-off tax of up to 50% of the value of the fund’s assets. The ATO does not have discretion in administering this test.

What are the three residency tests?

The three residency tests are:

1. Was the fund established in Australia?
2. The fund’s central management and control (CM&C) is ordinarily in Australia
3. The ‘active member’ test

Was the fund established in Australia?

Provided at least one of the fund’s assets was situated in Australia at that time, the test is not an issue and is easily passed. Merely opening a bank account with the fund’s first contribution would satisfy the criteria.

The fund’s CM&C is ordinarily in Australia

This is the main test the ATO focuses on.

The fund’s central management and control must be ordinarily exercised in Australia. Ordinary administration of the fund, such as bank transfers, executing trades, paying fund expenses, or accepting contributions, does not constitute CM&C. However, the ATO considers high-level strategic decisions, such as formulating or updating the fund’s investment strategy, significantly changing the trust deed, starting a retirement pension for a member, and reviewing and monitoring the performance of the fund’s investments against the investment strategy, indicative of what constitutes CM&C.

As SMSF trustees are typically the people making high-level strategic decisions, at least a 50/50 split of the trustees (or directors of the corporate trustee) must be physically located in Australia when making those decisions.

The test looks at where the trustees “ordinarily” reside. Leaving Australia temporarily on a holiday or for a job secondment does not mean the trustees ordinarily reside in a foreign country. The ATO take many factors into account, including:

• Where is your family located?
• Do you still own a home in Australia?
• Do you have assets in Australia, including a bank account?
• Is your job a secondment for a set period of time, with the intention of you returning to Australia on completion?
• Have you bought a house in the foreign country

A common misunderstanding is that a trustee who goes overseas for less than two years is automatically considered temporarily absent. The ‘two-year rule’ is a ‘safe harbour’ that simply confirms that an SMSF’s trustees can still have its CM&C exercised as if they were in Australia whilst they are temporarily outside of Australia for up to two years. The key test is the trustee’s intention. If the trustees intend to permanently reside overseas, CM&C could be outside Australia, putting the fund’s residency at risk from day one when they leave Australia.

 The ‘active member’ test

For funds with active members, at least 50% of their super balances must belong to Australian tax residents to pass the active member test.

Active members are those receiving contributions, including member or employer contributions and rollovers from other funds. SMSFs with no members receiving contributions still meet the active member test.

Do I have to wind up my SMSF if I move overseas?

You don’t have to wind up your fund if you move overseas. Whilst it is possible for SMSF members who move overseas temporarily to do nothing, getting it wrong carries catastrophic consequences for the fund. In practice, the trustees should plan in advance for an overseas move to avoid being put in a position where circumstances can change quickly and temporary moves become permanent.

Typically, when planning a move overseas, the SMSF trustees can consider the following:

• to avoid complex administration with individual trustees, it is easier if the fund has a corporate trustee which we recommend for all funds across the board
• the member going overseas resigns as director of the corporate trustee, and a replacement is appointed, who must hold an enduring power of attorney
• the member’s attorney must be domiciled in Australia
• appointing the member’s attorney as an alternate director who can step in under these circumstances
• if both members of the fund are moving overseas, only replace one of them, enabling the other member to legitimately participate in high-level decision-making without jeopardising the fund’s CM&C
• avoid making any contributions or rollovers when overseas to ensure the members pass the active member test
• when temporarily moving overseas, ensure you have clear documentation showing the move is temporary and that any trustee meetings are held in Australia to strengthen the case that the fund’s CM&C is in Australia
• transfer the fund to a small APRA fund
• wind up your SMSF and roll the member balances into a retail or industry fund

Proposed changes to SMSF residency rules

In the 2021/22 federal budget, the government proposed changes to relax the residency requirements by:

• extending the safe harbour test in relation to central management and control from two to five years, and
• removing the active member test

However, no draft legislation has been released yet, so we cannot rely on the proposed changes at the time of writing this blog in July 2026, and given it has been the better part of half a decade at this time there is no guarantee that the change will ever occur.