Reasons to wind up an SMSF

When to wind up an SMSF

It is important to regularly review your circumstances and decide whether you should continue with your self-managed super fund (SMSF) or wind it up.

There are various reasons why you may decide to wind up your SMSF. These can be due to a change in circumstances, such as:

• a change in personal circumstances – for example, you can‘t effectively manage the fund due to lack of time, permanent incapacity or failing health
• poor performing investments – for example, if the fund’s investments are incurring a significant loss, or the fund is unable to meet ongoing costs
• all members want to leave the fund
• all members have left the fund – for example, benefits have been paid out, rolled over into another fund or there has been the death of a member or trustee
• disputes between trustees – for example, relationship breakdown, differing opinions on how the fund should be run or the other trustees have acted in bad faith
• your fund no longer meets residency rules – for example, the trustees have moved overseas.

If a member chooses to leave your SMSF for any reason, your SMSF may need to be restructured to continue to meet the definition of an SMSF.

If you have breached superannuation laws, have a contravention and are facing compliance action from the ATO, winding up your fund does not remove your responsibilities.

Winding up your fund to access your super before you are permitted is illegal early access to super and will result in serious penalties.

Once an SMSF is wound up, you can't reactivate it.

Mandatory professional involvement

It is mandatory that you engage an approved SMSF auditor to examine your fund's financial statements and compliance with super laws prior to lodging your final SMSF annual return.

You may also require an actuary to provide an actuarial certificate if your fund is paying a pension.

Consider professional advice

All trustees share equal responsibility to ensure that their SMSF is wound up correctly. This is even if you use professionals to help you wind up your fund.

Always ensure that you use registered professionals. You can check your:

• tax agent's registration at the Tax Practitioners BoardExternal Link
• approved SMSF auditors at Australian Securities & Investments Commission professional registersExternal Link
• financial advisors at moneysmart's Financial adviceExternal Link.

How professionals can help when winding up

Tax agents and accountants can help you:

• prepare your financial accounts
• lodge any outstanding SMSF annual returns, your final annual return and any transfer balance account reporting required.

Fund administrators can help you:

• meet your reporting and administrative obligations
• provide you with services and advice, including accounting, tax and record keeping.

Legal practitioners can provide advice on:

• what is allowed under the law
• legal implications of issues such as divorce, estate planning or trustee disputes.

Financial advisors can provide advice and assistance with issues such as:

• how existing benefits should be paid
• recommendation of other superannuation products
• sale or transfer of assets.