We recently received an interesting enquiry from a tax agent that highlighted a couple of issues that needed clarification.
The first question related to the reference in our publication Winding up a self-managed super fund, that a bank account must be kept open until confirmation of a fund's wind up is received. We will be updating this booklet to remove this requirement. Bank accounts can be shut once all expected final liabilities have been settled. In the case of tax liabilities, including the final SMSF levy, the liability can be prepaid or paid with lodgment.
Maintaining an open bank account isn't required by legislation but has been a regulator recommendation. We are now clarifying this recommendation as it is not relevant for the vast majority of SMSFs who can work out their final liabilities.
However, the tax agent did raise a legitimate situation in which a bank account must be maintained; that is, when the SMSF is going to receive a tax refund. This happens only in a small percentage of cases after a final return has been lodged. In the case of an expected tax refund the SMSF bank account should be left open and after receipt of the money in the account. the amount should be rolled over to the successor complying regulated super fund.
Some financial institutions have allowed the former trustee to endorse the cheque to themselves if they can prove that the fund has been wound up. The practice of paying the money to an individual must not occur as the refund is a protected retirement asset and this money must stay within the super system until a condition of release has been met.
The only time the money can be accessed in the way described by the agent is if the individual is entitled to the money, as a withdrawal from the super system (for example, a lump sum/pension payment once they have met a condition of release).
We don't need an additional SMSF annual return to cover the rollover of this last transaction caused by a refund. As there would be no tax consequence for the SMSF and since lodging another final return would create some practical issues, such as having to pay another levy, we don't need another lodgment. However, a rollover form would still have to be completed and supplied to the successor complying regulated super fund.
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We're always interested to hear from our readers and we know from audience feedback that you appreciate case studies and reading about the experiences of other SMSFs. If you have a tricky question it's likely you're not alone - so do write to us if you need clarification on any SMSF-related matters and we'll do what we can to help.
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Last Modified: Thursday, 24 May 2012