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  • Matt Heighway

Winding Up Your SMSF - Why, When & How

We think SMSF’s are fantastic and if you are reading this you probably do too. The more of them we have the more we are Accounting, Co-ordinating Audits, Arranging Legal documents or requesting Actuarial Certificates and let’s be honest – the bigger we grow our businesses. So, yes, we think they are great but only if they are serving the right purpose for the members of the SMSF. Like anything in life, the journey of the SMSF evolves and changes over time. Life events lead to changes in circumstances, and this means that the suitability of an SMSF for some members may change too and it is our role as professionals to ensure that we are not looking at SMSF’s simply as numbers in our bank accounts.


Changing Circumstances


There are a number of avenues that lead Australians into establishing an SMSF. They either get recommended via a Financial Adviser or friends have told them how great they are. There are also far too many occurrences of SMSF Property businesses, Real Estate Agents and Unlicenced Accountants encouraging this structure. However, they are established, right or wrong, there are circumstances where the suitability of the structure may need to be revisited:

  • Change in personal circumstances – such as a divorce or a death

  • Liquidity issues – the SMSF is unable to meet its financial obligations

  • No members – all members have rolled their balances out of the SMSF

  • Trustee disputes – agreement on how the SMSF is managed cannot be found

  • Residency – the Trustees of the SMSF no longer meet the residency tests

  • Uncertainty – the members of the SMSF are not certain as to why they have an SMSF


More recently of concern is the number of SMSF’s that remain with outstanding lodgement obligations. This could be an indicator that the Trustees may not be suited to this structure and their retirement savings may be better managed elsewhere. A successful SMSF requires engagement by the Trustees with support from appropriately experience professionals, and between them there should be a regular review to ensure that an SMSF is still fit for purpose.


What if an SMSF is longer the plan?


Our approach to SMSF’s has always been to avoid complex outcomes. This means when we take over an SMSF or establish an SMSF for an Adviser, we always have the end in mind. If the SMSF is established correctly and all documents are in place, winding up the fund shouldn’t throw up any surprises. This is particularly important if the change in circumstances prompting the wind up is a death.

So, typically the wind-up process involves:

  • The Trustee, with the help of their adviser:

  • determining what is to happen with the existing investments – are they to be sold or transferred out in-specie

  • determining what is to happen with existing insurance policies

  • determining what is to happen to the member balances – are they being rolled over to another superannuation fund or are they able to be paid out as a pension or lump sum

  • taking the necessary steps to deal with the choices above

  • deciding on a wind up date

  • determining any interest due to be received up to the wind up date and also bank fees payable

  • providing information so the wind up accounts and SMSF Annual Return can be prepared

  • making any final expense and tax payments

  • making final member account payments or transfers to close the bank account

  • The SMSF Accountant/Administrator helping to:

  • determine any expense and tax payments to be made

    • arrange paperwork for pension commutations, if applicable

    • record any rollovers via SuperStream or arrange lump sum paperwork

    • arrange the audit of the wind up accounts and lodgement of the final SMSF Annual Return

    • arrange deregistration of the corporate trustee and notification to ASIC, if applicable

Common issues to look out for

The above seems relatively simple but things can go wrong in the process that can create unwanted outcomes. The introduction of SuperStream has also made the SMSF wind up process a lot more complex and it is even more important that Trustees get guidance from a professional. Some issues that we have encountered during the wind up process are:

  • delays with EFT rollovers resulting in the bank account not being closed when it was planned to be

  • delays with off market transfers to larger superannuation funds

  • lack of understanding of the documents required to properly deal with pension accounts

  • lack of understanding of the SuperStream requirements

  • lack of understanding that the final tax position needs to be determined and the final tax paid before the bank account is closed


For whatever reason you have come to the decision to wind up your SMSF, care should be taken to ensure that it is done correctly. Even if you have run your own SMSF without much help from a professional, we recommend that you get guidance during the wind up process.


Do you have an SMSF with overdue SMSF lodgements and you are not sure where to turn? Maybe you have an SMSF and are not sure why you have it? Our SMSF Rescue service is perfect for SMSF Trustees that currently have one or more years of overdue lodgements with the Australian Tax Office. Don't put your head in the sand, get started here.

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