When winding up your fund, you should consider the following:
Change of circumstances
You may no longer feel that this structure is suitable or appropriate for your personal circumstances, as life is forever changing. The more experienced trustee/member may die and the remaining trustee may not have the appropriate skill or desire to make the decisions for the fund. A relationship breakdown or business restructure may also change your objectives with the SMSF. The structure of the fund may change for the above reasons, however it’s important to note that this doesn’t necessarily ‘compel’ you to windup your SMSF.
Becoming a trustee of an SMSF requires a commitment to set aside time to correctly administer the fund and to make all the investment decisions required in order to meet the objectives of the fund. Some members after establishing a fund decide that it is more work than they expected and don’t have the adequate skill, time or interest in running their own fund.
The balance of your fund may drop below the desired threshold making the structure no longer cost effective. You may have reached the end of your draw-down phase and have insufficient benefits remaining to finance the compliance requirements of the fund. As with setting up an SMSF, you should always ensure that you have an appropriate balance to justify the costs of managing the fund, so at some point in time you may decide that the balance is no longer enough to cover the ongoing costs of running the fund.
Whether your personal situation has changed or you have done something amiss, your fund may no longer satisfy the definition of an SMSF, requiring the windup of the fund. Perhaps you are moving overseas for an extended or indefinite period and are unable to meet the legislated residency conditions in order to maintain the fund. Or perhaps the sole member/trustee of the SMSF has become a ‘disqualified person’.
If you are aware of any potential non-compliance issue, you should certainly discuss this with your accountant or administrator to see if the issue can be resolved or if the voluntary windup of your SMSF would be appropriate. In some instances, the ATO may request that you wind up your SMSF if they feel that the situation is not able to be rectified and/or the breach is significant.
When winding up an SMSF (or closing any superannuation fund for that matter), you should always consider the effect this may have on any insurance policies that are held by the fund.
This information is provided by SuperGuardian Pty Ltd, AFSL No. 485643. The information is general information only and does not take into account your objectives, financial situation or needs. You should obtain professional advice before acting on any of this information. Please refer to SuperGuardian’s FSG (available at https:// www.superguardian.com.au/pdfs/Financial-Services-Guide.pdf) for contact information and information about any remuneration and associations with product issuers.