20 July 2022
If you’ve decided it’s time to wind up your self-managed super fund (SMSF), then you may be wondering where to start. It can be a complex process, with a lot of paperwork and possible tax implications, and the choice of what to do with your super next.
People opt-out of their SMSFs and wind them up for many reasons. It may be too time consuming, costing too much in administration fees, performing poorly, or the investment strategy is no longer appropriate.
Whatever your reason, consider getting professional advice and assistance, including financial advice, and tax advice about selling your SMSF assets.
Rolling your SMSF into a new super fund
Once all members of your SMSF have decided to wind up your fund, there are various steps to take. It’s important to know once a fund is wound up, you can’t reactivate it. The trust deed (a legal document) of the SMSF may also list the requirements that need to be followed when winding up the fund.
Once you’ve sold all the assets of your SMSF, you need to decide what to do with your super. A financial adviser can assist with your personal situation and highlight some appropriate options. For example, an adviser may recommend rolling over your super to a super fund that takes care of running your account. Alternatively, if you’re retired or approaching retirement, they may suggest an account based pension as one option.
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There are a number of fee-for-service options offered by specialist accountants or financial advisers to help you wind up your SMSF. Fees may range depending on the complexity of the SMSF’s obligations and wind-up requirements.
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Winding up your SMSF
To wind up your fund, the ATO outlines the following things you need to do:
- Complete any requirements the trust deed specifies about winding up the fund
- Pay out or rollover all super (leaving a sufficient amount to pay final tax or expenses if required)
- Appoint an SMSF auditor to complete the final audit
- Complete and lodge the final SMSF annual return (including wind up details)
- Pay any outstanding tax
- After all expected liabilities have been settled and requested refunds are received, close the fund’s bank account.
There may be other steps your adviser thinks are relevant, based on your circumstances. The ATO also suggests you don’t close your bank accounts until all expected final liabilities have been settled and any refunds are received.
The ATO will let you know when it cancels the SMSF ABN. If the trustee is a company, you may consider if you want to wind the company up as well. Remember, any SMSF records will need to be kept for as long as the law requires.
FIND OUT MORE: WINDING UP A SELF-MANAGED SUPER FUND - ATO.GOV.AU
Opening an account based pension after winding up your SMSF
If you have multiple super accounts to consolidate, or are selling your SMSF down in stages, consider rolling your funds into one super account before opening an account based pension. It’s important to have a super account in place before you start your account based pension. That’s because you can’t add to a pension account once it has commenced.
Seek financial advice
Winding up an SMSF can be complex, given the amount of paperwork and tax implications involved. Before proceeding you should consider getting professional advice as the steps required for each SMSF and the potential impacts will vary, depending on:
- The trust deed and particular structure of the SMSF
- Its financial situation
- Many other factors unique to your circumstances.
If you’re interested in closing your SMSF, or if you’d like to speak to someone about the process, we have a network of financial advisers* members can connect with.
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