I bought this book at Vinnies in Nowra before the operation when I could still walk; I ought to have bought it decades ago when I could still walk away. As the cover suggests, it's the perfect book to discover the pros and cons of living for the quarter of the cost of Australia in places such as Bali, Thailand, Malaysia, and Spain.
The big eye-opener comes on page 158: "The great news about Australian superannuation is that the pension you draw from it can be received in Bali or Thailand or Malaysia, just as it can be received in Australia ... but the real danger zone is restricted to those with a self-managed superannuation fund (SMSF)."
And it goes on: "There is one key phrase to remember in respect of your self-managed super fund and that is: 'complying super fund.' A self-managed super fund becomes a non-complying fund if it loses its Australian nature - that is, if it is no longer considered to be an Australian superannuation fund by the Australian Taxation Office."
"You do not want that to happen. Let us give you a taste of the consequences. Should your self-managed super fund become non-complying at any point, the ATO can send you a tax bill that is equivalent to almost half the total assets in your fund ... And that is not all. The ATO will also tax any earnings of the fund at the highest marginal tax rate for every year that the fund is non-complying.
And if the fund does regain its residency status and becomes an Australian superannuation fund once more, then there is another one-off penalty. This time, just to welcome you home, an amount (asset values less contributions) will be included in the fund's assessable income in the year the fund regains its Australian residency status. This amount will be taxed at 15 per cent if the fund regains its complying status or 45 per cent if the fund remains non-complying for other reasons."
Phew! Non-compliance occurs when the self-managed super fund does not meet any one of these three tests:
- The fund was establshed in Australia or or any assets of the fund is situated in Australia;
- The central management and control of the fund is ordinarily situated in Australia;
- The fund has no active members or, if it does have active members, then at least 50 per cent of:
- the total market value of the fund's assets attributable to superannuation interests is held by active memebres; or
- the sum of the amounts that would be payable to active members if they ceased to be members is attributable to superannuation interests held by active members who are Australian tax residents.
If that sounds complicated, just go back to "2. The central management and control of the fund is ordinarily situated in Australia": if you are managing and controlling your self-managed super fund while permanently relaxing on a Bali beach at Nusa Dua, you're automatically non-complying.
Funny that, because if your Australian superannuation is with an industry fund, a public service fund or one of the big retail fund managers then you have nothing to worry about; neither have you anything to worry about when you receive the Australian age pension which can be paid overseas indefinitely.
Perhaps I should have read this book decades ago when I could still walk away; and perhaps I shouldn't have bothered setting up my own self-managed super fund either!
