Being an 'Australian superannuation fund' (ASF) is one of the requirements to be considered a 'complying superannuation fund'. Although this concept is relevant for all superannuation funds, it is most likely an issue for self-managed superannuation funds (SMSFs). A consequence of not being an ASF is the imposition of significant taxation penalties. The Income Tax Assessment Act 1997
(ITAA97) provides that a superannuation fund is an ASF for the income year if each of the following tests is satisfied:
- Australian establishment or situated asset test
- central management and control test
- active member test.
More information about the Australian Taxation Office's (ATO) interpretation of 'Australian superannuation fund' is contained in Taxation Ruling TR 2008/9 (the Ruling). In the ATO's view, an SMSF must meet all three tests at all times during the income year.
Requirements of being an ASF
Being an ASF is important for both taxation purposes and superannuation law purposes. Where an SMSF is not an ASF, it will not be a "complying superannuation fund" for the purposes of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
The ATO considers that all tests must be satisfied at all times during the income year for an SMSF to be considered an ASF for SIS purposes, which in turn is a requirement for being a complying superannuation fund. Loss of complying status in a particular income year means the market value of the fund's assets, less any pre-July 2007 undeducted contributions and post-June 2007 untaxed contributions, will be subject to tax at the top marginal tax rate (currently 45%). In following years, while the fund remains non-complying, the fund's assessable/taxable income is also taxed at this rate. If an SMSF loses its ASF status, the ATO must apply the tax law as described above - it has no discretion.