SMSF Association chief executive John Maroney said the requirement results in higher administrative and compliance costs for SMSF members temporarily living abroad, and prevents them from contributing to their fund.

“Removing the ‘active member’ test will ensure that SMSF members who are working overseas can still contribute to their fund where their SMSF balance exceeds 50 per cent of the fund’s assets,” said Mr Maroney.

The proposal has received mixed opinions from the industry so far, with some supportive of the measure and others more critical.

Atlas Wealth Management managing director Brett Evans said he believes the bigger issue is the central management and control requirements, as members have to relinquish control over the fund.

“If you’ve got an SMSF, then you’ve got at least $200,000 in the fund hopefully, but more likely $500,000 to a $1 million. It’s a lot of money to not have any control over,” said Mr Evans.

“Time and time again we see expats trying to control their SMSF from afar, but on paper it’s their sibling or mother or father who is the trustee and holds a power of attorney.”

Mr Evans said the big attraction to SMSFs has always been the control aspect, but with the retail super balance now offering a multitude of superannuation platforms that allow members to control investments, he believes moving from an SMSF to an APRA fund is less of a concern these days.

“The only time we see that it is not beneficial rolling from SMSF back to a retail super fund is when the SMSF either holds hard assets, such as physical property, art work, or gold bullion, or has a high single stock concentration that wouldn’t meet a retail funds diversity rules,” he said.

In a social media post, Quantum Financial head of strategy Tim Mackay slammed the proposal to remove the active member test as “ludicrous” as it could be difficult to trace the money flowing in from overseas and could be abused by criminals.

“Overseas super contributions will no longer be flowing into APRA regulated super institutions with all their checks and balances and reporting to AUSTRAC as they do now,” he said.

“It would open the biggest case of worms and does nothing for the vast majority of Australians.”

Others in the industry were very supportive of the proposal. Darren Wynen from Insyt said members may need to contribute money into the SMSF while abroad if they own property or have limited recourse borrowing arrangements and are restricted from doing so.

“They can’t make contributions to the fund because it’ll cause the fund to fail,” he said.

Members can also inadvertently trip up on the rules, he added, and face harsh penalties.

“If they’re coming back to Australia, then the policy should be focused on helping them to save for their retirement.”

H&R Block director of tax communications Mark Chapman also welcomed the proposal and said there is currently a large disparity in the treatment of super between SMSFs and APRA regulated funds.

“If I get a job overseas and I currently have an SMSF, I either need to stop making contributions into my SMSF while overseas, or I need to open an account with a large, commercial fund. Compare that to the situation where I simply have an existing account with a large fund and go overseas to work. I can continue to pay super contributions in the normal way,” he explained.

“Fairness should be at the cornerstone of our system and there doesn’t seem to be anything fair about that situation.”