When considering when and if your SMSF should be wound up, there are several aspects that need to be considered, such as what other options you may have, how your assets will be dealt with and what administrative requirements need to be attended to.
Your SMSF can remain operational for an indefinite period of time. However, you can choose to wind up your SMSF at any time, provided that all fund members agree to do so.
In most cases, the decision to wind up is due to member’s circumstances changing, such as:
- a member dying or moving overseas;
- a member leaving the SMSF (e.g., due to divorce or all benefits being paid out); or
- relationship breakdown, such as divorce.
Similarly, continuing poor performance of your SMSF assets may lead to the members deciding to roll their existing superannuation investments over to an APRA-regulated fund (such as an industry or retail fund). Decisions such as design of the investment strategy can then be left to the professional fund managers.
Sometimes, however, there are valid alternatives to winding up your fund. For example, in the case of a relationship breakdown, an option could be for the aggrieved member or members to roll their balances out of the fund, leaving you as the sole member of the fund.
Occasionally, the decision to close the fund is due to external factors – such as the ATO disqualifying the trustees. In these circumstances, an alternative to winding up is for the SMSF to convert to a ‘small APRA fund’ with an independent trustee.
If the members of your SMSF elect to close the fund, or are required to do so by the ATO, there are a number of requirements that need to be attended to. Broadly, these requirements are to:
- deal with all of the fund’s assets so that on closing the fund, no assets remain; and
- finalise all of the fund’s reporting, notification, audit and other administrative obligations.
This module covers a range of issues to be considered in deciding whether or not to wind up your fund.
DISCLAIMER – Complexities of superannuation
This information is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The information has been prepared without taking into account any personal objectives, financial situation or needs.
Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.