There will in all likelihood come a time when you will need to wind up your self-managed superannuation fund (SMSF). The reasons for winding up are many and varied, but could include:
Once the decision to wind up an SMSF has been made, it is always a good idea to sit down and read your trust deed, as it may contain vital information about winding up your fund. And remember, once a fund is wound up, it cannot be reactivated.
Do: Notify the ATO within 28 days
You need to let the ATO know within 28 days of the fund being wound up. You are required to include:
Do: Deal with member benefits
You need to make sure that:
But remember, if you have wound up your fund but you, as a member, have not met a condition of release – retirement, transition to retirement, or reaching an eligible age – you cannot access your superannuation. Your superannuation needs to be rolled over into another regulated superannuation fund. Remember, there are serious legal penalties for accessing your superannuation benefits before you are legally allowed.
Also note the potential capital gains tax (CGT) implications for your SMSF on the disposal of assets to enable the payment of benefits or the rollover of benefits to another fund.
Do: Arrange a final audit of your fund
When winding up your fund, you will need to have an audit completed by an approved SMSF auditor before you can lodge your final SMSF annual return.
Do: Complete your reporting responsibilities
When preparing and lodging your annual return (see the ATO’s NAT 71226 for return instructions), you need to complete all labels in relation to “Was the fund wound up during the income year?” (item 9). You must also pay any outstanding tax liabilities at this time and lodge any outstanding returns from previous years.
It is important to wind up your fund correctly. If you fail to carry out these reporting responsibilities, you may be the focus of compliance activities and you may be subject to penalties. After meeting all of your tax responsibilities, the ATO will send you a confirmation letter stating that it has cancelled your SMSF’s ABN and closed your SMSF’s record on its systems.
Don’t: Cancel the fund’s ABN. The ATO will do this once it has been notified of the intention to wind-up the SMSF. It will then send the trustee written confirmation that the ABN has been cancelled.
Don’t: Walk away completely. The fact that you have lodged a final SMSF annual return and reported wind up information may not be the last contact you will have with the ATO. You need to finalise all lodgement and payment obligations before you can wind up.
Don’t: Dispose of any paperwork. A lot of your records will need to be kept for several years, and some even up to 10 years.
Don’t: Close the bank account. Keep the SMSF’s bank account open until all expected final liabilities have been settled and requested refunds are received. Tax liabilities (including the final SMSF levy) can be prepaid or paid with lodgement of the SMSF annual return. Also, once a bank account for an SMSF has been closed, a new one cannot be opened without first producing a new trust deed.