An SMSF requires substantial time, effort, and commitment to run. If you decide it's not for you, winding it up and moving back to a super fund is possible.
The reality of an SMSF
The decision to start a self-managed super fund (SMSF) is often driven by a desire to have more control over how your superannuation savings are invested. Many Australians open an SMSF with the intention of investing in property or managing investment portfolios themselves. Some open them under the advisement of a financial planner or accountant who will manage it on their behalf (for a fee).
However, a SMSF isn't for everyone, as the management of an SMSF requires considerable time, effort, and commitment to run. You may have reached retirement and need to draw a retirement income from your SMSF but are not sure how. This may be more complicated if there is a break down in the relationship with your accountant or financial planner.
While there are several reasons why you might decide to wind up your SMSF, there are a lot of things you need to think about, including costs, tax implications, and the process of transferring your savings from the SMSF to a traditional super fund.
Key reasons to wind-up your SMSF
If you choose to wind-up your SMSF, transferring to Equip Super may be a suitable alternative for you.
Change in personal circumstances
Health issues, the death of a trustee, or a shift in family dynamics can make managing an SMSF difficult or no longer appropriate.
Cost issues and financial viability
If the value of your SMSF’s assets decreases, the fixed costs of managing the fund (auditing, admin and investment fees) can often outweigh the benefits.
Lack of time or ability
Managing an SMSF involves staying on top of superannuation laws, Australian taxation rules, and investment decisions. For some, especially those transitioning into retirement, maintaining this level of involvement can become overwhelming.
Poor investment performance
Some SMSFs don’t perform as well as expected, and trustees may find it increasingly challenging to make effective investment decisions.
A summarised process for winding up an SMSF
- Understand the specific requirements under the SMSF trust deed about winding up the fund, and
- Get written agreement by organising a meeting with all trustees to ensure everyone agrees with the decision. Keep minutes and get every trustee to sign the agreement to wind up.
Distribute all remaining super benefits to members, leaving enough to cover final tax and expenses if necessary. If members are under the age of 65, benefits must be rolled over to a complying fund such as Equip Super.
Note that all SMSF assets will need to be sold or disposed of in accordance with superannuation laws and the trust deed.
The auditor completing the final audit of the fund must be an approved SMSF auditor.
Ensure it includes the wind up details. If applicable, lodge your transfer balance account report with the ATO.
Settle tax liabilities before closing the SMSF.
If the SMSF is eligible for a refund after lodging the final annual return, roll it over to a complying fund such as Equip Super. This step is crucial and must be done immediately after receiving the refund.
After the ATO confirms that the fund’s ABN is cancelled, you can close the fund’s bank account.
You can find the full process and requirements for winding up an SMSF on the ATO website.
Key considerations when winding up an SMSF
Following the ATO’s process to wind up an SMSF is an important part of meeting your legal and compliance obligations.
However, there are some other key factors to keep in mind.
Settling liabilities and debts - All debts must be cleared before the SMSF can be closed. This includes any loans or outstanding obligations the fund holds.
Selling SMSF assets - If your SMSF holds assets such as property or shares, they must be sold when winding up the fund.
Winding up an SMSF may affect your retirement income; speaking with a financial planner can help you decide whether winding up your SMSF is the right decision.
Closing an SMSF and transferring to an industry fund
Once you’ve decided to wind up your SMSF, transferring your superannuation to an industry super fund such as Equip Super can provide several benefits.
Benefits of Equip Super
- Access to a team of investment professionals. Equip Super’s investment options are managed by highly experienced investment managers with proven track records of delivering strong long-term returns.*
- Lower administration burden. Equip Super handles all administrative tasks, compliance requirements, and investment management. This gives you more time to focus on enjoying your retirement rather than dealing with the day-to-day management of a superannuation fund.
- Flexibility and control. Equip Super offers a variety of investment options. This gives you the flexibility to choose an investment strategy without the burden of managing it yourself.
We acknowledge all First Peoples of the beautiful lands on which we live and work, and their enduring knowledge and connections to Country. We honour the wisdom of and pay respect to Elders past and present.