Once a fund has been wound up, it cannot be reactivated. It’s also important to follow critical steps in this checklist and the ATO’s winding up an SMSF Form.
Your SMSF wind up checklist
As stated by the ATO, the following tasks are required when winding up an SMSF:
- complete any requirements that 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.
Some of these items are in addition to the normal annual SMSF accounts and audit.
Although an SMSF may sell down its investments to cash and then transfer member benefits to another superannuation fund during the year, it’s likely the end of year accounts and audit do not happen until sometimes many months afterwards.
Fees to Wind up and Close an SMSF
When it comes time to closing your fund, additional costs and processes need to be factored in. SMSF windup fees are $715 in addition to the regular SMSF administration, accounting and audit fees for the financial year the SMSF operates.
Certain regular fees such as the SMSF audit are typically fixed and flat, and often do not change or reduce purely because the balance of the SMSF is nil or low at the end of the financial year.
Also there are a number of additional documents including trustee minutes and written notifications to the ATO which must be completed which take an SMSF administration provider additional time.
Similarly, for the members benefits to be transferred to another super fund, interim financial statements and member statements must be prepared to enable the rollover or transfer form to be generated as this is required by the super fund receiving the members monies.
Final SMSF Annual Return When Winding Up
Another important consideration is preparing the final SMSF annual tax return. The ATO typically doesn’t release the specifications to the accounting software companies until later in the financial year, meaning the electronic SMSF tax return cannot be completed until very close to, or after the end of the financial year.
This means the accountant or SMSF provider often has to either leave the fund on their accounting platform (and incur additional fees) or manually complete a paper-based SMSF tax return for the ATO to process.
Timing of an SMSF Wind Up
The timing of an SMSF windup is important. When an SMSF has received distributions from managed funds and ETFs during the financial year, typically there will be tax credits the SMSF is entitled to (which will either offset and reduce tax payable or be refundable to the SMSF in the case of franking credits).
An SMSF may have to remain open an operating with a small balance (essentially a ‘zombie SMSF’) to enable the franking credits to be refunded, and the final rollover to be paid on behalf of the members. If these credits are not refunded until after the annual tax statements are issued un August or September, the SMSF will definitely need to wait until the next financial year to complete its final return.
The additional cost and time taken to wind up an SMSF may be a source of frustration to SMSF trustees and their advisers, but it’s a necessary evil when it comes to winding up a self-managed superannuation fund.
Closing an SMSF trustee company – voluntary de-registration cost
Where an SMSF has a company trustee, it is likely the company needs to complete a voluntary de-registration. This will incur an additional fee from ASIC as well as the professional fees to complete the necessary forms. The voluntary company de-registration fee (from 1 July 2021) is $42.
How to wind up an SMSF
For advisers and accountants using Intello, an SMSF wind up request can be submitted via Online Forms on our Portal. To complete the SMSF wind up form for an fund we look after, the following information needs to be provided to us:
- Name of the SMSF
- Trustee company details and whether Intello will also be applying for a voluntary de-registration of the trustee company
- Estimated date of wind up
- Details of the assets of the fund and how the assets will be paid or transferred out of the SMSF (e.g. cash rollover, in-specie transfer, combination etc)
- Details of the destination superannuation fund account and account numbers / member numbers (where known)
Upon receipt of the request we will review the SMSF and determine any specific complexities or action items to wind up the fund.
Recommended documents to wind up an SMSF
The following formal documents are recommended to wind up an SMSF:
- Letter to ATO confirming wind up
- Notice to Members of wind up
- Trustee / director resolution to commence wind up
- Trustee / director resolution to complete wind up
- Deed of SMSF winding up
Any questions on wind up an SMSF please contact us.