Winding up your Self Managed Super Fund is normally the final stage of running your SMSF, and as a Trustee it is important to make sure that all the Funds’ assets have been properly dealt with and that you have met all your reporting and administrative obligations.
Winding up a SMSF requires a great deal of care and attention, and Baggetta & Co can assist you to get it right.
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The main reasons for winding up a SMSF include:
Insufficient balance of funds
It is likely that a SMSF will be wound up where there are insufficient funds in the SMSF as a result of the Fund having paid out most of the monies either as a lump sum or as pension payments over time to members, and there are now no assets or monies left to operate the Fund and meeting all ongoing costs.
When there are no remaining assets in a Fund, it is considered to have reached the end of its life cycle and therefore induces Trustees to wind up their SMSF.
The death or incapacitation of a member
Some SMSF’s are wound up after the death of a member, or when the Trustee of the Fund suffers cognitive capacity and disability concerns.
The remaining member(s) of the SMSF may decide that they do not wish to continue on with the Self Managed Super Fund, especially if the deceased or incapacitated member was the one who originally undertook all the responsibilities to establish the Fund and undertake the ongoing management of the fund.
Your circumstances have changed or are disinterested
You, as Trustee, and your SMSF members may decide that you want to wind up your SMSF because of poor results, your circumstances may have changed, you may be looking to simplify your life and remove the burden of ongoing paperwork and daily investment management, or you are just disinterested in continuing to manage a SMSF.
All of these are legitimate and acceptable reasons for a Trustee and Members to decide to wind up your SMSF and to hand back the management of your superannuation to a retail or industry superannuation fund.
You are moving overseas (Non-residency)
If you are moving overseas and depending on your length of absence, the Australian Taxation Office may deem your SMSF to have failed the definition of being an Australian regulated superannuation fund, and therefore you may choose to wind up your SMSF.
If you are returning to Australia, and do not wish to wind up your SMSF, you have the option to appoint an “Approved Trustee”. By definition, this means appointing a professional Corporate Trustee Company. Upon appointment your SMSF will become a Small APRA Fund (SAF) and will be regulated by APRA. On you return from overseas, you can transfer it back to a SMSF and become Trustee again.
The non-residency regulations for SMSFs is complex and must be carefully considered and enacted to ensure that the Fund remains compliant to continue to be eligible for concessional taxation treatments and benefits.
There are complex laws and regulations governing SMSFs, and certain people cannot act as a Trustee whether it be as an Individual or Director of Corporate Trustee.
The individuals and events which will deem Individuals to be ineligible to remain as a Trustee of a SMSF or to act as a Trustee will include:
- Individuals less than 18 years of age
- Undischarged Bankrupt
- Disqualification from the ATO for serious contraventions, including illegal early release of money
- Being convicted of a ‘dishonest conduct’ event
- Individuals subjected to a civil penalty order
- Loss of mental capacity due to accident or health conditions
Self Managed Super Fund Trustees who become ineligible to be Trustees during their Trusteeship have the option to resign as Trustee of a SMSF, and the SMSF has essentially six months grace to restructure itself as allowed by the Australian Taxation Office.
When husband and wife members divorce, in most cases one members’ benefits must be rolled over to another complying superannuation fund, and therefore may require the Self Managed Super Fund to be wound up.
However, if the remaining member wishes to continue the existing SMSF, then it is highly likely that the existing Fund needs to be restructured to meet the defined requirements of a SMSF.