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Winding Up An SMSF
There are a number of reasons why you may need to wind up (close) a self managed super fund (SMSF):
- All the members have left the self managed super fund (SMSF) (eg – they have died)
- All the benefits have been paid out of the fund
- The fund may no longer meet the definition of an Australian superannuation fund because the trustees have moved overseas permanently
- The members may have found that they are not ready for the complexity and law surrounding a self managed super fund and the time it takes to manage the fund.
How Do You Wind Up An SMSF?
Winding up or closing down a Self-Managed Super Fund (SMSF) in Australia is a multi-step process that requires careful consideration and adherence to the Australian Taxation Office (ATO) regulations. The process generally involves the following key steps:
- Decision to Wind Up
- Review the Trust Deed
- Disposal of SMSF Assets
- Pay Out or Roll Over Benefits
- Final Tax Return and Audit
- Pay Any Outstanding Liabilities
- Closing Bank Accounts
- Notify the ATO
- Retention of Records
- Professional Advice
Explanation Of The Above Points
- Decision to Wind Up: The decision to close an SMSF must be agreed upon by all members/trustees. This should be formally documented in the minutes of a meeting.
- Review the Trust Deed: Check the SMSF’s trust deed for any specific requirements or procedures regarding the winding up of the fund.
- Disposal of SMSF Assets: You will need to sell or transfer all the fund’s assets. This may involve selling investments and ensuring all contributions and rollovers have been processed. Keep in mind potential capital gains tax implications.
- Pay Out or Roll Over Benefits: Benefits must either be paid to members as a lump sum, assuming conditions of release are met, or rolled over into another complying super fund.
- Final Tax Return and Audit: Lodge a final tax return and have the fund audited. This includes declaring all income received and capital gains or losses realized until the winding-up day. You should also inform the ATO that this is the final return for the SMSF.
- Pay Any Outstanding Liabilities: Ensure all of the SMSF’s liabilities, including any tax liabilities, have been paid.
- Closing Bank Accounts: After all liabilities have been paid and all assets have been disposed of, close the SMSF’s bank accounts.
- Notify the ATO: Within 28 days of the fund being wound up, you must notify the ATO. The SMSF will then be removed from the Super Fund Lookup system.
- Retention of Records: Keep records of the SMSF for at least five years after the fund has been wound up. In some cases you may need to keep records for longer.
- Professional Advice: Given the complexities involved, especially with regards to the tax and legal matters, it is highly advisable to seek professional advice from a qualified accountant or financial advisor such as Leenane Templeton who are experienced in SMSFs.