Key Highlights

•  The decision to wind up should be made at a trustee meeting, recorded in minutes and supported by a written agreement signed by every trustee.

•  Assets must be realised or transferred, liabilities settled and member benefits paid or rolled over before the final audit and return.

•  The bank account should stay open until final liabilities are paid, refunds are received, rollovers are complete and the ATO confirms the wind-up in writing.

Deciding to close a self-managed super fund rarely lines up neatly with 30 June. A member may move overseas, a couple may separate, a surviving spouse may no longer want the administrative load, or the trustees may simply decide a public offer fund suits them better. Whatever the reason, closing a fund mid-year compresses a full year of compliance into a shorter window, and the order in which trustees do things matters.

The ATO's current wind-up guidance sets out the steps in a sequence. Following that sequence carefully is what separates a clean closure from one that drags on for months because a refund cannot be paid, a rollover bounces or a final audit cannot be signed off.

Start with the trust deed and a written decision

The first port of call is the fund's trust deed. Deeds can contain their own wind-up procedures and may determine whether assets can be transferred to members in specie rather than sold. Trustees should check those rules before anyone lists a property or sells a share portfolio.

The ATO expects the decision to wind up to be made at a trustee meeting, recorded in minutes and supported by a written agreement signed by every trustee. Electronic signatures are acceptable. The ATO also encourages funds to keep an exit plan, even well before closure, covering matters such as death benefits, enduring powers of attorney, estimated wind-up costs, asset liquidity and who will keep the fund's records.

Realise or transfer assets, then settle the bills

All fund assets must be disposed of in line with superannuation law and the deed. The ATO recommends allowing enough time for this, particularly for illiquid assets, and documenting how, when and at what amount each asset was sold, how it was valued and who bought it. Capital gains tax and stamp duty need to be factored in before trustees calculate what each member will receive.

Next come the liabilities. The ATO lists final invoices, asset-sale costs, PAYG instalments, PAYG withholding and capital gains tax among the amounts that must be paid. Trustees should check the fund's ATO account balances and request any refunds due, because a fund cannot be closed while credit or debit balances remain.

Pay or roll over member benefits correctly

Before preparing the final return, trustees need to calculate each member's entitlement. A member who has met a condition of release can take a benefit as cash or roll it over. A member who has not met a condition of release must have their benefit rolled over to another complying super fund. Paying a benefit to a member who is not entitled to it is illegal early access and can lead to significant penalties.

Where a member is receiving a pension, the ATO says the pension payment standards must be met before the pension is commuted, and the income stream should be ended before the fund is wound up. Commutations must be reported on a transfer balance account report, and the ATO asks funds to lodge it promptly, particularly where the member is rolling over to an APRA-regulated fund, to avoid double counting.

Trustees can use the ATO's SMSF member TICK service to validate member tax file numbers before rolling benefits over through SuperStream. The ATO also recommends leaving enough money in the fund to cover post-lodgment costs such as audit fees, professional fees and tax.

The final audit and final return

The fund must have been audited by an approved SMSF auditor for every year since it was established, and the final period must also be audited before the final annual return is lodged. In the final SMSF annual return, trustees indicate that the fund was wound up during the year, provide the wind-up date and confirm that lodgment and payment obligations have been met. The supervisory levy adjustment for wound-up funds is completed in the return using the levy table in that year's instructions.

According to the ATO's levy guidance, a fund that is not newly registered and paid its levy in the previous year does not pay a further levy in the year it winds up, because that year is already covered. A newly registered fund that winds up pays $259 for the current year.

Close the bank account last

One of the most common causes of delay is closing the fund's bank account too early. The ATO says the account should stay open until final liabilities are paid, final refunds are received, SuperStream rollovers are complete and the ATO has confirmed in writing that the fund has been wound up. Lodging the final return is itself the notification that the fund is winding up, and the ATO then confirms the ABN cancellation. A wound-up fund cannot be reactivated.

Hypothetical example

Consider a hypothetical two-member fund that decides in November to close. One member is retired and drawing an account-based pension; the other is 52 and still working. The pension would need its payment standards met before commutation, the commutation reported on a transfer balance account report, and the working member's benefit rolled over because no condition of release has been met. The trustees would still need a final audit and a final return for the part year, and the bank account would stay open until the ATO confirmed closure.

Takeaway

A mid-year wind-up is achievable, but it is a project rather than a single transaction. Trustees who check the deed, sequence asset sales, liabilities, benefit payments, audit and lodgment in order, and keep the bank account open until the ATO confirms closure, improve their chance of a timely finish. Professional help is worthwhile where pensions, property or unusual assets are involved.