Tips for when trustees want to wind up an SMSF
Why wind up an SMSF? Most of the time, because it's no longer necessary. Trustees may have passed on, or there may no longer be a financial point of keeping it open. It may also be due to trustees not able to run an SMSF for example if they move overseas, or become bankrupt. The ATO can also force the wind up due to SMSF compliance issues.
All told, the ATO recorded 1,416 SMSF wind-ups in the year to June 2016 - a stark drop from the previous year's 11,136. Nonetheless, it's important for accountants and financial advisers to put their best foot forward when trustees decide it's time to call curtains on their self-managed super.
Helping with the final SMSF audit
An SMSF must file a final tax return for the current financial year, including the associated paperwork to wind up the fund, and finally an SMSF audit before it can be wound up.
Closing an SMSF requires a methodical and structured process. It is important to have up to date information, with regular communication involving all stakeholders. If things go wrong, the wind-up process may be delayed for another financial year.
There are two options to wind up a fund, either rolling over the member's benefits to another superannuation fund or paying them directly to invest in their names. This option is only possible if a valid condition of release has been met.
Ensuring the SMSF will be emptied out
Advisers assisting with the wind-up need to account for all assets, and income. Many times we see a fund that didn't account for items such as franking credits, or some of the final SMSF expenses.
Advisers should ensure if closing a fund in the pension phase, to pay any pro-rated minimum benefits before rolling over or cashing out the member's entitlements.
Assist with pre-wind up compliance
At Audit your Superfund we can issue an invoice in advance that can be prepaid before the bank account is closed. It is a bit of a waiting game but having good structure and procedures will ensure SMSF wind up occurs in a timely and efficient manner.
We provide prompt, quality, audits at an excellent price. To ensure funds are wound up in a compliant manner, get in touch with the team at Audit your Superfund.