Winding up your SMSF is the final stage of running your SMSF. It requires dealing with all of the SMSF’s assets so that none remain, and completing all of the reporting and other administrative obligations as a Trustee.
The process to wind up your SMSF is detailed below.
Step1
Convert all the SMSF assets to cash
In order to wind up your SMSF, Trustees must make sure that:
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Members' benefits have been transferred from the SMSF, either to a personal bank account (if the member meets a condition of release) or rolled over to another complying Superfund.
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Your SMSF has no assets left once it has been wound up.
To enable the transfer of benefits from the SMSF, all the assets of the SMSF must be converted to cash and all proceeds should be deposited into your SMSF bank account.
Step2
Finalise Annual Compliance Requirements for the prior Financial Year if applicable
If your SMSF is required to lodge a Tax Return for the prior Financial Year, you will be required to submit an Online Checklist via your ESUPERFUND Client Portal.
The Annual Checklist details the information we have for your SMSF and also advises what additional information is required from you.
On receipt of the Annual Checklist Information from you, ESUPERFUND will attend to the Annual Compliance Requirements.
After we have completed the Annual Compliance Documentation for your SMSF, you will be notified to review and sign the Compliance Documentation.
For more information on the Annual Compliance Process, please click here.
If your SMSF is not required to lodge a Tax Return for the prior Financial Year, then you may skip this Step.
Step3
Notify ESUPERFUND of your decision to wind up your SMSF
Once you have completed Step 1 and Step 2 detailed above, please notify ESUPERFUND of your decision to wind up your SMSF via the Client Portal Inbox.
You will need to provide ALL the following information at the same time:
1. Confirm your decision to windup the SMSF on the Trustee Minutes.
All Trustees are required to sign the Minutes to evidence that all parties have agreed on the wind-up decision and the distribution method of the member benefits. If you are the sole director of your SMSF, then a Trustee Minutes is not necessary.
To download the sample Trustee Minutes, please click here.
2. Specify the Financial Year that you wish to wind up the SMSF.
You will need to ensure that by 30 June of the chosen Financial Year, your SMSF will have no assets left. Accordingly, if your SMSF still held some assets on 30 June, you can only wind up the SMSF in the following Financial Year.
3. Specify how each member’s benefits are to be paid out of the SMSF.
Members' benefits must be transferred from the SMSF, either to a personal bank account (if the member meets a condition of release) or rolled over to another complying Superfund. Each option is discussed below.
Option One – Member Withdrawal
It is important to note that members must meet a condition of release allowing them to access their super benefits. A member has met a condition of release when:
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The member has reached 65 years old. For more information, please click here.
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The member is aged between the preservation age and 65 and has declared retirement with ESUPERFUND. For more information, please click here.
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The member is aged under the preservation age, but has met a special condition of release such as having a terminal illness or permanent incapacity. For more information, please click here.
We caution that if the member does not meet a condition of release, the benefits will need to be rolled over to another complying Superfund (see Option Two below) upon winding up your SMSF.
Option Two – Rollout to Another Superfund
If at least one member needs to roll over the member benefits to another complying Superfund, then the following information is also required to be provided to ESUPERFUND:
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Details of all contributions and the contribution type (i.e. concessional / non – concessional) made by each member to the SMSF since 1 July of the current Financial Year till present;
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Details of all rollovers made by each member to the SMSF since 1 July of the current Financial Year till present;
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Details of all withdrawals and the withdrawal type (i.e. pension / lump sum) made by each member from the SMSF since 1 July of the current Financial Year till present;
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Bank/broker transactions details for all the SMSF bank/broker accounts that are not set up by ESUPERFUND from 1 July of the current Financial Year to the account closure date;
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Receiving Fund details: Fund Name, Address, ABN, Unique Superannuation Identifier (USI) & Member Client Identifier.
IMPORTANT NOTE: You are required to complete Steps 1-3 and provide all the requested information at the same time in your first message to ESUPERFUND via the Client Portal Inbox. Failure to do so will increase the processing time of your wind-up application.
Step4
Pay the once-off Wind Up Fee
ESUPERFUND charges (incl. GST) to wind up an SMSF. We will instruct you to pay the Wind Up Fee to our office via Electronic Funds Transfer (EFT) upon the receipt of your wind-up application.
Step5
Pay the ESUPERFUND Annual Fee for the current Financial Year if applicable
The ESUPERFUND Annual Compliance Fee for attending to your SMSF’s final-year Compliance Requirements is payable.
If your wind-up application is received before ESUPERFUND processes the Annual Fee on 15 January, we will instruct you to pay the Annual Fee for the final Financial Year to our office via Electronic Funds Transfer (EFT) upon the receipt of your wind-up application.
If your wind-up application is received after ESUPERFUND has already processed the Annual Fee on 15 January, then you may skip this Step.
Step6
ESUPERFUND estimates income tax and prepares Rollover Benefit Statements if applicable
If at least one member needs to roll over the member benefits to another complying Superfund, ESUPERFUND will prepare Rollover Benefits Statements for the members to initiate the roll-out.
When preparing the Rollover Benefits Statement, ESUPERFUND will also estimate the income tax liability for your SMSF’s final Tax Return and instruct you to pay the estimated tax liability (if any) to the ATO in advance.
However please be aware that the income tax amount is estimated based on the information you provided and it is subject to adjustment after the final Tax Return is completed.
The time frame for preparing the Rollover Benefits Statement is at least one month upon the receipt of your wind-up application and provided that you have completed Steps 1-5 detailed above.
Therefore, you are required to complete all the above actions before 31 May to allow ESUPERFUND enough time to prepare the Rollover Benefits Statement. If new wind-up application is received after 31 May and a Rollover Benefits Statement is required, the key wind-up process might not be completed by 30 June.
If all members of the SMSF decide to withdraw their super benefits (subject to meeting a condition of release), then you may skip this Step.
Step7
Pay the Income Tax and other SMSF expenses if applicable
Before paying out or rolling out all the member benefits from the SMSF, you should pay off all the SMSF expenses that may or may not fall due from your SMSF bank account. For example, the estimated income tax liability for the final Tax Return (if any) advised by ESUPERFUND in Step 6 should be paid to the ATO in advance.
IMPORTANT NOTE: DO NOT CLOSE your SMSF bank account until the final Tax Return is lodged and all expected final Tax liability/Refund have been settled with the ATO.
Step8
Pay out or Roll out each member’s benefits from the SMSF
If the member chooses to withdraw the super benefits (subject to meeting a condition of release), you need to transfer funds from the SMSF bank account to a personal bank account.
If the member chooses to roll over super benefits to another complying Superfund, you need to sign and provide the Rollover Benefits Statement prepared by ESUPERFUND to the next Superfund together with a cheque for the member’s benefits in the SMSF. Please contact the SMSF bank directly to issue the cheque. If you choose to transfer your super benefits via Electronic Funds Transfer (EFT) instead of a cheque, you will need to contact the receiving Fund to confirm whether they can accept the EFT method.
You are required to roll over the exact amount that is specified in the Rollover Benefits Statement prepared by ESUPERFUND. Your receiving fund might reject to accept your rollover if the cheque or EFT amount is not matched.
A copy of your signed Rollover Benefits Statement and the documentation evidencing the funds have been received by your next Superfund as a rollover will be required to be provided to ESUPERFUND after Financial Year end as part of the Annual Compliance Process.
IMPORTANT NOTE: If you fail to withdraw / roll out all the SMSF members’ super benefits by 30 June, you will need to defer the wind-up of your SMSF for another Financial Year which may result in unnecessary financial costs.
Step9
ESUPERFUND prepares the final Tax Return and Audit for your SMSF
In order for ESUPERFUND to prepare the final Tax Return and Audit for your SMSF, you will be required to complete and submit an Annual Checklist. If you have previously provided some information to our office (e.g. when you requested our office to prepare a rollover benefit statement), ESUPERFUND will manage to complete some parts of the Annual Checklist based on all available information.
You will be notified to review the Checklist information prefilled by our office and complete any remaining Checklist Steps via the Client Portal Inbox. On receipt of the Annual Checklist Information from you, ESUPERFUND will attend to the preparation of the final Tax Return and Audit for your SMSF in the order in which the Online Checklist is submitted.
On completion you will be notified that the final Compliance Documentation is ready for review and signing via your Client Portal Inbox. Once you are satisfied that the documentation is correct, you have to sign to authorise ESUPERFUND to lodge the final Tax Return with the ATO.
The time frame required to finalise the final Tax Return is around 3-4 months from the day you submitted the Annual Checklist.
Step10
ESUPERFUND lodges the final Tax Return with the ATO
On receipt of the signed documentation from you, ESUPERFUND will lodge the final Tax Return to notify the ATO that your SMSF is being wound up.
Step11
Settle all expected final Tax Liability/Refund (if any)
If the lodgement of the final Tax Return results in a further income tax liability, you will need to pay the tax liability to the ATO before the lodgement due date using your personal funds.
If the lodgement of the final Tax Return results in a tax refund, you will need to pay out or roll out the refund amount as soon as it is received from the ATO. An additional Rollover Benefits Statement will also be prepared by ESUPERFUND to roll over the amount if you do not meet a condition of release.
IMPORTANT NOTE: You should not close your SMSF bank account until the final Tax Return is lodged and all expected final Tax liability/Refund have been settled with the ATO.
Step12
Receive confirmation from the ATO that your SMSF has been wound up
If everything has been completed correctly, ATO will send you a letter stating that they have cancelled your SMSF ABN and closed your SMSF records. This will conclude the wind-up process.
IMPORTANT NOTE: You need to ensure all bank and broker accounts held by your SMSF are closed after the SMSF is wound up.
Consider Risks and Seek Professional Advice
We caution that there may be Capital Gains Tax (CGT) implications for your SMSF on the disposal of assets and winding-up of your SMSF. For example, any unused Capital Losses of the SMSF will be trapped within the Trust Structure of the SMSF and cannot be transferred or distributed out of the SMSF. In addition, once your SMSF is wound up, it can’t be reactivated.
We recommend that you seek professional advice from a financial adviser. A licensed financial adviser will consider your personal situation and make a recommendation suitable to your financial needs. ESUPERFUND is a no advice model and does not provide financial advice to clients.