A specialist auditor has warned advisers they may run the risk of litigation if written instructions are not received from fund members as to how the assets should be treated in the event of an SMSF wind-up.
“The trustees should contact each member and ask them how they’d like their final benefit paid out to them [when an SMSF is being wound up]. It’s best to get this in writing from the members because, once again, you don’t want any disagreement in the future about how those benefits were paid out,” ASF Audits head of education Shelley Banton told attendees of a recent technical webinar.
“It’s important not to be a little bit off the wall here because if you’re a trigger happy adviser and you just sell everything without any written instructions from the trustees, you’re not only going to have an unhappy accountant, you could also be setting yourself up for potential litigation if the fund incurred a loss from that sale.”
Banton outlined the circumstances whereby this course of events may occur.
“This can easily happen if the member had met a condition of release and wanted the asset transferred to them by an in specie lump sum for example, which could happen at a later date without incurring that loss,” she noted.
“So make sure [the instruction] is written down and that also the document is dated.”
Further, she took the opportunity to confirm standard rules and regulations continue to apply until the SMSF wind-up is actually completed.
“One of the things that can get forgotten here is that SIS (Superannuation Industry (Supervision)) [obligations] and the trust deed rules continue to be enforced until the fund is closed,” she said.
“There have been plenty of wind-ups that have had ACRs (auditor contravention reports) lodged for compliance breaches in that last year [of the fund’s operation].
“At audit it’s not like we [can say:] ‘Oh it’s a wind-up, the ATO doesn’t care and we can just give that [compliance breach] a leave pass.’ It doesn’t work like that.”