To be a complying superannuation fund and receive tax concessions, a Self-Managed Superannuation Fund needs to be an Australian superannuation fund at all times during the financial year.
If your SMSF cease being an Australian super fund because it does not satisfy the residency rules, it may become non-complying and its assets (less certain contributions) and its income may be taxed at the highest marginal tax rate.
The residency rules for an SMSF are complex, so it is very important that you understand what you need to do in order for your super fund to be remain compliant.
The cost of your fund becoming non-compliant can be very high indeed – with assets and income potentially being taxed at the highest marginal tax rate applying within Australia. That is a very good incentive to make sure your fund is compliant.
The Fund residence conditions are shown at the following link: https://www.ato.gov.au/Super/Self-managed-super-funds/Setting-up/Check-your-fund-is-an-Australian-super-fund/
The following table provides a summary of how the three residency tests apply.
There are ways to pass test 2 even if all members of the super fund are going to become non-resident for tax purposes. For example, the members could each appoint a Legal Personal Representative to act on their behalf in relation to their superannuation assets.
However, if test 2 is passed then it is very important that the non-resident members do not become Active Members by virtue of making contributions or rolling over funds from another super account to their SMSF.
It should be noted that this is a very complex area of the superannuation law and you should obtain professional advice if you are at all unsure about the status of your SMSF.