Are you having doubts about using your self managed superannuation fund (SMSF) for your retirement? Whatever your age, if recent market conditions, cost or the amount of administration involved are getting to be too much and you would like to wind up the SMSF, there are several steps involved. Winding up an SMSF is not a simple process and requires the trustee to understand the terms set out in the trust deed, dispose of the fund’s assets and finalise compliance obligations, among other things.
Even if you are happy with your SMSF, it may be prudent to ensure that there are no impediments to winding up if something unforeseen happens. An exit plan should be in place as a matter of course. In some complex cases it may be prudent to seek professional advice.
For most SMSFs, the first step in a winding up is to find out what the fund’s trust deed requires in that event. For example, the trust deed may require all of the assets of the fund to be sold, or all ownership to be transferred to members.
Trustees are then required to meet to ensure they agree with the winding up decision and to sign the winding up agreement. Decisions and details about asset sales should be carefully documented.
The next step is to finalise outstanding tax and compliance obligations, and final invoices and expenses due to assets sales and outstanding tax liabilities need to be paid before the calculation and distribution of member benefits. Where a member meets a condition of release, their benefits can either be paid out in cash or rolled over into another complying super fund. Where a condition of release is not met, the member benefit must be rolled over into another complying super fund.
Finally, after member benefits have been distributed, the trustee needs to ensure the SMSF has been audited every year since its establishment and complete one final audit.The final SMSF annual return can then be lodged. The ATO will confirm by letter that the SMSF has been wound up, close the SMSF records on its system, and cancel any associated ABNs.