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Super Mews March 2015 Winding up an SMSF
1. MARCH 2015
www.bdo.com.au
While we focus on
SMSFs and what
trustees can and
cannot do with their
SMSFs, there might
come a time when
you determine that
the SMSF no longer
meets your needs.
WINDING UP A SELF MANAGED
SUPERANNUATION FUND (SMSF)
VIABILITY, IS A SMSF RIGHT FOR ME? OR RIGHT FOR ME NOW?
While we focus on SMSFs and what trustees can and cannot do with their SMSFs, there might come
a time when you determine that the SMSF no longer meets your needs. This will mean that you
may need to wind up your SMSF now or sometime in the future. This could happen for a number of
reasons:
• All the members and trustees have left the SMSF
• All the benefits have been paid out of the fund
• It no longer meets your needs
• You don’t have the time, skill or knowledge to manage the fund
• It’s not cost-effective
• You decide to relocate overseas
• A relationship between fund members breaks down
• The ATO have directed you to wind up the fund.
If you are considering winding up your SMSF you need to deal with the members’ benefits and
finalise the fund’s reporting responsibilities. Below is a checklist which can be used when winding
up the SMSF:
TRUST DEED
Your fund’s trust deed is the first place you should check it will detail what is required for winding
up your fund.
Agreement by trustees
Each trustee should agree in writing:
1. That the fund is to be closed
2. The disposal of the investments (sale or transfer)
3. The member’s benefits are to be paid out.
Disposal of Investments
Trustees need to consider how to realise the investments on hand. In particular consider how to
arrange the disposal of assets such as:
• Listed securities
• Unlisted securities
• Securities which are frozen or in administration.
Listed securities generally speaking are easy to sell on market, however unlisted securities and
investments which are frozen or in administration may be more problematic. Consideration is
required as to how to deal with these types of investments.
If the investment is unable to be sold to an external party then a possible solution is to dispose of
the investments through the use of an off market transaction. Bearing in mind that any transactions
must be at market value and should ensure that you have sufficient evidence to support the value
used.
2. 2 SUPERNEWS
Disposal of investments using off market transfers must ensure market
value is used and that the cash is paid into the superfund within a couple
of days of the transaction. If eligible a member may be able to receive their
final benefit in the form of cash and or assets of the fund transferred in
specie. (Note it is extremely important that you first check the fund’s trust
deed to ensure you are eligible to pay the benefit in this way and it must
also be at market value).
MEMBER’S BENEFITS
Each member must confirm how and where they want their benefits paid
or dealt with.
If the member is transferring to another superannuation fund, they need
to:
• Confirm details of the receiving superfund (including account/
member number)
• Confirm how the benefits are to be paid , cash or cash and assets
transferred in specie (if eligible).
If the member is in accumulation phase are they eligible to access the
benefits? That is, have they met a condition of release? If they are eligible
and can access the benefits as a lump sum how do they want to receive the
benefits?
• Cash
• Cash and /or assets transferred in specie.
If the member is under 60 years of age, the trustees must also calculate
any income tax payable on the lump sum (if applicable).
If the member is in pension phase, the trustees will need to ensure the
minimum pension has been paid up to the point where the account is to be
closed (ie on a pro-rata basis).
Other Considerations are:
• Does the member want to transfer their account to another superfund
and continue to pay a pension. (Note for Centrelink purposes, the
pension in the new superfund will be a new pension or income
stream).
• Does the member want to stop the pension and withdraw the balance
as a lump sum (provided they are eligible to access the benefit in the
form of a lump sum). If they are eligible and can access the benefits as
a lump sum how do they want to receive the benefits?
- Cash
- Cash and /or assets transferred in specie
• If the pension is a lifetime / fixed term complying pension it can only
be transferred to another superfund to acquire another complying
pension.
SMSF WIND UP RECORD KEEPING
On the wind up of a superannuation fund final Financial Statements,
Members Statements, Income Tax Return and final fund audit need to be
prepared and completed. The financial statements must:
• Account for all income and expenses to the date of closure of the fund
• Factor into the statements the expenses to complete the wind up
process, for example:
- Accountancy fees
- Audit fees
- Supervisory levy
- Actuary certificates
• Calculate tax on income and capital gains derived to the date of
closure of the fund. This will include gains on investments still to be
sold and calculate the tax effect of those sales.
