Winding Up Your SMSF - Key Considerations

Winding Up Your SMSF – Key Considerations

While running an SMSF seemed like an obvious choice when you initially set it up, situations change, and it is a good thing to review this regularly to assess whether this is still the best option. If it remains the best option, then play on, and you rest easy knowing you have the right structure and strategy. 

On the other hand, if you assess that there are more appropriate options that are a better fit for your current circumstances, it makes sense to take action promptly. 


Is an SMSF still right for you?

Some of the most common reasons we see from Trustees deciding to wind up an SMSF include the following:

  • Aging and Capacity Concerns
  • The time and administrative burden has become too much
  • The balance of the fund has dropped to a level where the cost economics do not stack up anymore
  • Life events such as relationship breakdown or death
  • Trustees wish to move overseas


What do i need to consider before winding up my SMSF?

While there may be genuine reasons to wind up your SMSF, there are some important considerations before taking action.

  • Centrelink: Are there any Centrelink implications of wind up? For example, you may have a more favourable income test applied to any pensions within the fund, and winding up may mean a loss or reduction in Centrelink entitlements.
  • Capital Gains Tax: Are there any capital gains tax implications of selling assets within the fund to facilitate wind up? Are you going to lose carried-forward capital losses?
  • Trust Deed: Your fund trust deed. Your deed may contain specific wind up instructions on how to wind up the fund.
  • Life insurance: Are there insurance policies in the fund that need to be retained, and can you transfer these to your new fund without triggering medical underwriting?
  • Illiquid assets: Does the fund hold assets such as real property, unlisted shares, or private equity? 
  • Reserves: Has your SMSF been maintaining reserves? If so, these unallocated amounts would need to be allocated before closing the SMSF.


The Process of Winding Up Your SMSF – What’s Involved

So if you have done your due diligence and decided to wind up your SMSF, here are some essential things to action. This list is not exhaustive, and it is worth getting professional advice and support to complete an SMSF wind up.

  • Engage professionals to guide you through the process, including your accountant and/or financial planner.
  • Check your Trust Deed to understand your requirements.
  • Confirm with members how they would like payment of their existing benefits.
  • Finalise outstanding tax and compliance obligations.
  • Arrange for the preparation of a final audit and draft financial statements.
  • Transfer assets out of the fund.
  • Lodge the final tax return for the fund
  • Notify the ATO in writing of the wind-up 
  • Make provision for post wind-up expenses and tax refund 


How can Pekada help?

We know that financial matters can sometimes feel overwhelming, especially when winding up your SMSF. That’s why our experienced team is here to guide you through the entire process, providing clear explanations and support for every part of the process. 

Please book a chat with one of our advisers if you want to discuss your needs.