Key Highlights

  • Winding up does not remove responsibility for past breaches.
  • All trustees share equal responsibility, even when using professionals.
  • Personal penalties cannot be met from fund money.

Winding up an SMSF can feel like a clean break, but it is not. Trustees stay accountable for how the fund was run, and for how it is closed. That is the clear message of the ATO's guidance, and it is one that trustees thinking about closing a troubled fund should take seriously.

This evergreen article draws on the ATO's reasons-to-wind-up page (last updated 24 July 2025), its non-compliance actions page (last updated 12 February 2026), its trustee obligations page (2 April 2025) and a November 2025 SMSF Adviser report on ATO scheme warnings.

Winding up does not erase the past

The ATO states that winding up does not remove responsibilities for past breaches or ATO compliance action. Its non-compliance page is equally direct: winding up an SMSF after a contravention does not stop compliance action. So a trustee who knows of a problem cannot expect closure alone to resolve it.

The ATO also says all trustees share equal responsibility for winding up the fund correctly, even when they use professionals. A tax agent, administrator or adviser can help, but the responsibility remains with the trustees.

The ATO's range of responses

According to the ATO, its approach starts with encouragement: guidance, support and an early engagement and voluntary disclosure service. It says trustees who disclose unrectified contraventions may receive reduced penalties, and that their actions will be taken into account.

Where problems persist, it lists further tools. A trustee can propose an enforceable undertaking. The ATO can issue a rectification direction requiring a contravention to be fixed within a set time; failing to comply is a strict liability offence. It can issue an education direction requiring a trustee to complete an approved course. For serious contraventions it can issue a notice of non-compliance, in which case the fund is taxed at the top marginal rate (currently 45 per cent, says the ATO) and loses rollover eligibility. It can freeze assets and seek civil or criminal penalties through the courts, and it can disqualify individuals.

Personal administrative penalties

The ATO explains that administrative penalties fall on individual trustees and corporate-trustee directors, who are jointly and severally liable. They cannot be paid or reimbursed from fund assets. The penalties are set in penalty units. According to the ATO, 60 penalty units apply to contraventions such as lending to members and relatives, borrowing and in-house assets; 20 units to operating standards and notification of change in entity status; 10 units to accounts and statements, minutes, trustee change records and member reports; and 5 units to matters such as written appointment of investment managers. Penalties may be remitted in whole or in part, depending on the circumstances. The dollar value of a penalty unit is set separately and should be checked at the time.

Sole purpose and early access

The ATO's trustee obligations page restates the sole purpose test: the fund must exist to provide retirement benefits, or death benefits where a member dies before retiring. Activities that can breach it include early access and personal use of fund assets. The reasons-to-wind-up page separately states that winding up to access super early is illegal and carries serious penalties.

The SMSF Adviser article, published on 24 November 2025, reports the ATO warning that some schemes promise access to super without a condition of release being met, and that some promoters claim support from ATO rulings. Trustees should be sceptical of anything that sounds like a shortcut.

Practical considerations for trustees

Run a short compliance check before closing. Review the last few years of accounts, minutes and audit reports. If the auditor has raised issues, make sure they have been addressed. If there is a possible contravention, consider taking independent legal or tax advice about rectification and voluntary disclosure before the fund closes, since the ATO says disclosure can be taken into account.

Keep the paperwork. The ATO's auditor guidance recommends keeping records, including wind-up records, for at least 10 years after lodging the final annual return.

Make sure every trustee understands the process. Because liability is joint, one trustee relying entirely on another is risky.

A hypothetical illustration

Imagine a fund that lent money to a member in a past year. The trustees decide to wind up and assume the matter ends there. Under the ATO's stated position, the earlier lending would remain a matter the regulator can pursue. This is hypothetical and not a statement about any real fund.

Takeaway

Closing a fund does not close the file on past conduct. Trustees remain jointly responsible for compliance, personal penalties cannot be met from fund money, and the ATO encourages early disclosure. If something has gone wrong, the best time to seek professional advice is before the fund is wound up.