As many of the initial SMSF owners begin to enter their 80s, now is a good time to review all the different aspects to consider when it is time to close a fund, a specialist SMSF adviser has said.
“Winding up an SMSF requires careful management of a number of tasks,” The SMSF Coach financial planner and SMSF specialist adviser Liam Shorte said in his recent online post covering some of the key aspects to consider for a correct SMSF wind-up.
“If your SMSF is not wound up correctly, it is possible it will remain open, which may lead to additional payments for required financial statements, fund audits and the lodgement of the annual return.”
Shorte said the SMSF trust deed should be the first area to check as it may contain certain requirements regarding the wind-up process.
It was then essential to obtain written agreement, he said.
“To ensure all parties are properly informed and to avoid unnecessary complications, each trustee or member should sign an agreement to close the fund,” he said.
“In the case of a corporate trustee, the directors must decide whether the company should remain running or be wound up.”
He said another key area to consider is to verify with members how they would like their existing benefits paid, specifically whether they want their benefits to be rolled over to another super fund or paid out as a lump sum.
“The wind up of an SMSF means there will be no assets left in the fund. To move these assets out, you need to comply with both the Superannuation Industry (Supervision) laws and the trust deed,” he noted.
“This generally means paying out lump sums to members, provided they can satisfy a condition of release, or rolling over the members’ benefits to another complying super fund – rolling benefits out to another super fund requires two ATO forms to be completed.”
SMSF trustees will then need to ensure all prior year financial statements, tax returns and other tax and compliance obligations have been finalised, he added.
“You need to notify the ATO in writing within 28 days of the fund being wound up with the name and ABN of the SMSF, the date the SMSF was wound up and a contact person with their contact details,” he said.
“Arrange for a final audit and the final SMSF annual return.
“If everything has been done correctly, the ATO will send you a letter stating that they have cancelled the SMSF’s ABN and closed your SMSF records on their system.”
Only after the ATO confirmation letter has been received should the SMSF’s bank accounts be closed, he warned.
When it came to post-wind-up expenses, rather than keep the SMSF running and delaying the wind-up process, the SMSF can be closed and some cash can be retained on trust by the former trustees until the liability is paid.
“Professional advice should be sought to cater for your [clients’] personal situation,” Shorte said.