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  • Winding up

    At some point, you may need to wind up your self-managed super fund (SMSF), so it's useful to plan early. It’s important to wind up your fund correctly, if you don’t meet all your obligations you may incur penalties. There are some key tasks you need to perform, such as dealing with members benefits and finalising your reporting responsibilities.

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    Reasons to wind up a fund

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    Duration 2:41. A transcript of When should I wind up my SMSF is also available

    There are varied reasons why trustees may decide to wind up their SMSF which often come about due to a change in circumstances, such as:

    • death of a trustee
    • disability or illness, resulting in the trustees being incapable of running an SMSF
    • a lack of time to manage the SMSF
    • your fund is unable to meet ongoing costs
    • all members want to leave the fund.

    The breakdown of a relationship between one or more members of your SMSF may affect the ability of a member to effectively undertake their trustee/member obligations. If a member chooses to leave your SMSF due to a relationship breakdown, their benefits must be rolled over to another complying super fund. Your SMSF does not have to be wound up, but it may need to be restructured to continue to meet the definition of an SMSF.

    Exit plan

    It's important for all funds to have an exit plan in place even if you're not ready to wind up now, as this will make it easier when the time does come. Your plan should consider all the circumstances of your members and be signed off by all trustees. You should also keep this plan with the fund's records.

    When developing your exit plan you should consider:

    • how to deal with members benefits upon their death
    • appointing an enduring power of attorney
    • estimated costs of winding up
    • liquidity of funds' assets
    • being SuperStream ready to enable any roll out of benefits
    • who will keep copies of the fund's records and transactions.

    Make sure you review your exit plan regularly, assess your fund and each member's circumstances to decide if an SMSF is still right for you. You may want to speak with an SMSF professional to help you decide.

    Winding up your fund

    There are some key tasks you need to complete in order to wind up your fund properly.

    Make sure you:

    • check your trust deed – understand any requirements that the trust deed specifies about winding up the fund
    • get written agreement – organise a meeting with all trustees to ensure everyone agrees with the decision. Keep minutes and get every trustee to sign the agreement to wind up
    • sell or dispose of all the fund's assets – ensure you deal with all assets in accordance with the super laws and trust deed
    • finalise outstanding tax and compliance obligations – this includes
      • transfer balance account report (TBAR): if you were paying any of your members an income stream you must cease it before winding up and lodge your final TBAR with us as soon as possible
      • pay as you go (PAYG) payment summary: if you paid benefits to members, or a lump sum to a deceased estate even if you didn’t withhold any tax, you may need to issue a PAYG payment summary (if the benefits paid are not assessable income and not exempt income, then no withholding tax or a payment summary is required).
       
    • pay outstanding expenses and tax liabilities
      • these may include
        • final invoices
        • expenses due to asset sales
        • outstanding tax liabilities (such as PAYG instalments and PAYG withholding)
         
      • log in to Online services for business or contact us or your tax professional to find out the balance of any accounts we hold for your fund. Request any refunds if they are due, you can't close your fund if there are any credit or debit balances remaining on the accounts
      • if you receive a refund that you are not eligible to access then ensure you roll it over using SuperStream immediately after receiving the refund and before we cancel the fund's Australian business number (ABN). Trustees can rely on the valid response received from the SMSFmemberTICK service when they rolled over the member's benefits.
       
    • calculate and distribute member benefits – make sure you leave enough money in the SMSF to pay any amounts outstanding after you've lodged your annual return, such as audit fees and tax expenses. If making a rollover you need to use SuperStream
    • appoint an SMSF auditor to complete the final audit – you must do this before lodging your final return
    • complete and lodge all outstanding SMSF annual returns, as well as the fund's final return – answer all sections relevant to the fund’s wind up, this lets us know it's your final return and we will adjust your SMSF supervisory levy
    • notify third parties that your fund is winding up
      • these may include
        • employers making contributions to your fund
        • SMSF professionals
         
      • if your fund has a corporate trustee structure, and the corporate trustee was only set up for the purposes of the SMSF, you will need to notify ASIC that the company needs to be deregistered
       
    • close your fund's bank account – first ensure
      • expected liabilities have been settled
      • refunds have been received
      • you have completed any rollovers using SuperStream
      • you have received confirmation from us that your fund has been wound up.
       

    Note: If you need help winding up your fund or preparing a plan to wind up your fund, you can contact a professional to help.

    After winding up

    Once a fund is wound up, it can’t be reactivated.

    By completing and lodging your final SMSF annual return, you have informed us that the fund is winding up. You don't have to write to us in order to wind up your SMSF.

    Don't cancel the fund's ABN. Once we have processed your annual return we will confirm your fund has been wound up by sending you a letter stating we have:

    • cancelled the fund's ABN
    • closed your SMSF records on our system.
    Last modified: 14 Apr 2022QC 23348