In this guide
- What is the SMSF residency test?
- What should I do before I move overseas?
- What happens if you breach the SMSF residency rules?
- Can I return to Australia for a week each year to pass the test?
- Do the residency rules differ for those in the retirement phase?
- Can I set up an SMSF while I’m living overseas?
- The bottom line
Growing numbers of Australians spend time living overseas for work or in retirement, and if you plan to be one of them and you have an SMSF, you need to be aware of the strict residency requirements.
Failure to comply with these residency rules could result in the loss of tax concessions for your SMSF, financial penalties imposed on you personally, or even the forced winding up of your fund.
The tax concessions available under Australian superannuation legislation are worth protecting, especially for higher-income earners on high marginal tax rates.
Member contributions and fund earnings in compliant Australian super funds are taxed at the concessional rate of 15%, instead of your marginal tax rate, up to certain contribution limits.
A requirement of being a ‘complying superannuation fund’ is that your SMSF meets the definition of an Australian super fund, and this can only be achieved where the three ‘residency test rules’ are adhered to.
Need to know
In the May 2021 Budget, the Morrison Government proposed relaxing the residency requirements for SMSFs by:
- Extending the central management and control safe harbour test from two years to five years
- Removing the active member test altogether.
These measures would allow SMSF members to continue contributing to their super fund while temporarily working or studying overseas, ensuring a more level playing field with large APRA-regulated funds.
The Albanese Government committed to pursuing these changes in its October 2022 Budget, but as at December 2025 there has been no further progress made to legislate this reform.
Until proposed reforms (see above) are legislated, it’s important to understand the current rules.
What is the SMSF residency test?
There are three residency rules or conditions that an SMSF must meet to be classified as an Australian super fund.
Rule 1: The establishment test
The SMSF must have been established in Australia or at least one of the fund’s assets must be located in Australia, for the entire financial year.
The SMSF is ‘established in Australia’ if the initial contribution was paid and accepted by the trustee of the fund in Australia.
This is the simplest of the three tests and would not often be an issue. It is often met with the establishment of the fund and the opening of an Australian bank account that is maintained for the fund.
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