Winding up your SMSF? A list of do’s and don’ts
When the time comes for you to wind up your fund, there are things to do, and things to avoid.
The reasons for winding up your SMSF could include that there are no assets left as members have been paid all their benefits, or members move overseas (and the fund cannot satisfy the definition of an “Australian superannuation fund”), or that members just don’t want the responsibility of being a trustee any longer. Once the decision has been made it is always a good idea to sit down and read your trust deed, as it may contain vital information about winding up your fund. And remember, once a fund is wound up, it cannot be reactivated.
Do: Notify the Tax Office within 28 days. You need to let the Tax Office know within 28 days of the fund being wound up. You can ask this office to help you do it in writing, but you must ensure to include the name of your SMSF, its ABN, your name and contact details, and the date you wound up your SMSF.
Do: Deal with member benefits. You need to make sure that:
- you deal with members’ benefits according to the superannuation law and the trust deed
- you obtain market value balances of all related accounts
- you ensure all SMSF assets have been sold and member contributions dealt with in accordance with the trust deed and superannuation laws
- you ensure all proper steps are taken to transfer ownership and title of any assets
- you decide whether any corporate trustees
- your self-managed super fund has no assets left once it has been wound up.
But remember, if you have wound up your fund but you, as a member, have not met a condition of release – retirement, transition to retirement, or reaching an eligible age – you cannot access your superannuation. Your super needs to be rolled over into another regulated fund. Remember, there are serious legal penalties for accessing your superannuation benefits before you are legally allowed.
Contact TNR on the potential capital gains tax (CGT) implications for your SMSF on the disposal of assets to enable the payment of benefits or the rollover of benefits to another fund.
Do: Arrange a final audit of your fund. When winding up your fund, you will need to have an audit completed by an approved SMSF auditor before you can lodge your final SMSF annual return.
Do: Complete reporting responsibilities. When preparing and lodging your annual return, you need to complete all labels in relation to “Was the fund wound up during the income year?”(item 9). You must also pay any outstanding tax liabilities at this time and lodge any outstanding returns from previous years. TNR can assist you in these matters.
It is important to wind up your fund correctly. If you fail to carry out these reporting responsibilities, you may be the focus of compliance activities and you may be subject to penalties. After meeting all of your tax responsibilities, the Tax Office will send you a confirmation letter stating that it has cancelled your SMSF’s ABN and closed your SMSF’s record on its systems.
Don’t: Cancel the fund’s ABN. The Tax Office will do this once it has been notified of the intention to wind-up the SMSF. It will then send the trustee written confirmation that the ABN has been cancelled.
Don’t: Walk away completely. The fact that you have lodged a final SMSF annual return and reported wind up information may not be the last contact you will have with the Tax Office. You need to finalise all lodgement and payment obligations before you can wind up.
Don’t: Dispose of any paperwork. A lot of your records will need to be kept for several years, and some even up to 10 years.
Don’t: Close the bank account. Keep the SMSF’s bank account open until all expected final liabilities have been settled and requested refunds are received. Tax liabilities (including the final SMSF levy) can be prepaid or paid with lodgement of the SMSF annual return. Also, once a bank account for an SMSF has been closed, a new bank account cannot be opened without first producing a new trust deed.