Non Resident SMSF Contributions Reminder

From time to time a SMSF may comprise non-resident members. If that occurs careful consideration of all the compliance rules needs extra care. I'm often hearing members who think they CANNOT contribute to super if they are non-resident.

One specific issue is the active member test (s295-95(2) and s295-95(3) ITAA97)... It basically says that a non resident member may not contribute to a SMSF where their non-resident interests are ever 50% or more of the total fund. The test applies not just to the contributing member but all non-resident members. I wont go into the complexity....If all members are non-resident then none of them may contribute if the simple rule.

This can be a trap if the members pay a simple fund expense. The fund may become non-compliant and face a massive tax penalty (which is how the super laws were designed).

But there is a very easy way to bypass this rule to bring the proceeds of a contribution into a smsf. The contribution limiting rule prevents non-residents adding to the fund by way of contribution...either concessional or non-concessional. But that person may be permitted to make a contribution to a non-SMSF fund ie an industry fund, public offer fund etc. Then fulfil the requirements for a concessional contribution.... then rollover to the SMSF.

Legal advice for funds that face a non-residency issue is essential as is financial advice for a fund facing this contribution problem.