SMSF Winding Up
SMSF winding up refers to the process of closing down the fund and distributing its assets to members. Winding up may be initiated voluntarily by the trustees or required by regulatory authorities if the SMSF is no longer viable or compliant with superannuation laws
There are several reasons why people wind up their SMSFs and opt-out. It might be the consequence of a trustee passing away, the SMSF’s management taking too long, incurring excessive administrative expenses, performing badly, or the investment plan no longer making sense.
For whatever reason, considering the complexity of winding up an SMSF, you might want to think about seeking expert guidance and support, including tax and financial advice about the sale of your SMSF assets.
It’s critical to comprehend the actions required to properly wind up your SMSF.
- Make a plan on when to wind up
Trustees who do not have an exit plan are frequently unprepared and taken off guard when an unforeseen circumstance forces them to consider winding up their SMSF.
- Consider seeking professional advice
Having professional help from SMSF throughout your departure preparation and
closing off. You remain in charge of the fund even if you hire an expert to assist with its winding up. Every trustee has an equal amount of accountability.
- Prepare your exit plan
Each fund has a different exit strategy. You have to take the person into account.
since every fund is unique, the conditions of your fund and its members.
Ensure the departure strategy has the approval of every trustee. Ascertain that the agreement with the departure plan is documented; this can be done, for instance, by having the trustees sign a document that records the decision in the meeting minutes.
- Regularly assess your exit plan
Your exit strategy is not a set-it-and-forget kind of paper, much like your investing strategy.
Make time to go over your strategy and make any necessary adjustments. Evaluate your fund and each member’s situation on a regular basis.
The Process of SMSF Winding Up
There are procedures you need to follow when closing your fund, just as when you first open an SMSF.
It’s critical to properly wind up your fund. If you fall short of all of your
fines if you fail to fulfil your duties when you wind up your SMSF.
After an SMSF has been wound up, it cannot be reactivated.
- Check your Trust Deed: Read the trust deed for your fund. It can provide important details regarding closing down your fund. For instance, instead of giving members ownership of the assets, your trust deed may provide that you must sell them all together
- Get a Written Agreement: Ensure the consent of every trustee. Call a meeting of the trustees and make sure everyone is on board with the decision to close the fund. Keep a copy of this decision with the fund’s records and include it in the meeting minutes. Every trustee should sign the dissolution agreement to prevent any disagreements later on. This signature could be digital.
- Dispose of Assets: Sell or otherwise dispose of the assets in your fund.
- Complete any outstanding compliance and tax duties: To wind up your fund and file your final annual return, you must finish your reporting and lodging duties.
- Pay outstanding expenses and tax liabilities: There can be final or unpaid expenses associated with your fund such as final invoices, expenses due to asset sales, outstanding tax liabilities, etc.
- Calculate and distribute member benefits: Benefit distribution is contingent upon membership status and fulfilment of release requirements.
- Complete final audit: Verify whether your fund has undergone annual audits since it was founded.
- Lodge your final SMSF annual return (SAR): Lodge the final return for the fund along with any unfiled annual returns.
- Notify Third Parties: Think about the people you will need to advise when you close your fund (e.i. any employers making contributions to your fund, your fund’s SMSF professionals)
- Close your SMSF bank account: Closing the bank account associated with your fund last is crucial. Closing it too soon can cause the wind-up process to take longer.
After Winding Up
Funds cannot be reactivated once they have been wound up.
You have notified the ATO that the fund will be winding up by filling out and submitting your final SMSF annual return. To close your SMSF, you don’t need to send us a letter.
Don’t cancel the ABN of the fund. After processing your annual return, the ATO will send you a letter confirming that your fund has been wound up. In this letter, they will say that they have:
-removed the ABN for the fund
-cleaned out your SMSF records from their database.