Having worked with clients and their accountants or administrators over the last few years to close some SMSFs,  I thought an article on the winding up of an SMSF would be appropriate as many of the initial SMSF owners enter their 80’s and consider their options.  

Winding up an SMSF is a process whereby you transfer to another fund or liquidate all assets left in the fund and pay them to the beneficiaries after costs, prepare all the final accounts for ATO reporting and administrative requirements and advise the ATO of your decision. You do need to consider your trust deed and follow a process to make sure that if you are winding up your SMSF, you complete all the tasks laid out by the deed and required by the ATO.

 Whilst the practical reality is that your accountant or SMSF administrator will take care of most of this for you, it is important that you are aware of and understand what is involved as you are ultimately responsible.

There are a few reasons why trustees may wish to wind up their SMSF:

 Winding up an SMSF may occur for a number of reasons:

• The health of a member/trustee starts to deteriorate and if they are the main driver of the fund as this may result in an inability to run the fund in the future or;
• Many people just get tired of the paperwork, responsibility and ongoing burden of managing your SMSF.
• In the last few years we are seeing those first people who set up a SMSF decades ago have reached a point where the fund’s assets have reduced to a level such that it is no longer cost-effective to run the fund. Remember in your 80’s the minimum pension rises from 7-9% over the decade and 11% at 90.
• A member has moved overseas for work or leisure and become a non-resident for Australian taxation purposes.
• All the members and trustees have left the SMSF (for example, they may have transferred their benefits to another fund or have passed away).
• Where the members are divorcing and neither wishes to retain the SMSF fund for one reason or another.

What you need to do

 Winding up your SMSF will require careful management of a number of tasks. If your SMSF is not wound up correctly it is possible it will remain open, which may lead to additional payments for required financial statements, fund audits, and the lodgement of the annual return.

These tips outline some of the key considerations and tasks involved in winding up an SMSF. Please note this is not a comprehensive list and professional advice should be sought to cater for your personal situation.

1. Check the trust deed – The first place to turn should be the SMSF trust deed, as this may contain certain requirements regarding the wind-up process.

2. Obtain written agreement – To ensure all parties are properly informed and to avoid unnecessary complications, each trustee/member should sign an agreement to close the fund. In the case of a corporate trustee, the directors must decide whether the company should remain running or be wound up.

3. Verify with members how they would like existing benefits paid – Each member must notify how and where they want their benefits to be paid, specifically whether they want their benefits to be rolled over to another super fund or paid out (as a lump sum of cash or in-specie transfer of assets via an Off-market transfer).

4. Prior year’s tax and compliance obligations – Ensure all prior year financial statements, tax returns and other tax and compliance obligations have been finalised.

5. Notify the ATO
   You need to notify the ATO in writing within 28 days of the fund being wound up, with the following details:
   – the name and ABN of your SMSF
   – the date your SMSF was wound up
   – a contact person, with contact details such as name, phone number, email etc.

6. Either payout or rollover member benefits
   The wind up of a SMSF means that there will be no assets left in the fund. To move these assets out, you need to comply with both the SIS laws and your trust deed. This generally means paying out lump sums to members( cash or in-specie transfer of assets via an Off-market transfer), provided they can satisfy a condition of release, or rolling over the members benefits to another complying superannuation fund (usually either a retail fund or industry fund). If you are rolling benefits over to another super fund, there are two ATO forms for completion:- Request to transfer whole balance of superannuation benefits between funds(NAT 71223) – Members of your SMSF use this form to request the transfer of the whole of their benefits to another super fund.

• Rollover benefits statement (NAT 70944)  – If you rollover benefits to another fund, you need to complete this form as a trustee. You keep a copy, and send a copy to the new super fund that the members’ balances are being transferred to.
• If any members are eligible (and have received) their benefits as a lump sum payment, you will need to complete the form ETP payment summary – superannuation fund (NAT 2606).
• A PAYG payment summary – superannuation income stream (NAT 70987) needs to be completed if a pension payment was paid to a member and tax was withheld.

Note also that where you are selling assets so you can pay out benefits or roll over benefits to another fund, there may be capital gains tax issues.

7. Arrange for a final audit and the final SMSF annual return – Arrange the audit and the fund should then lodge its final annual return with the ATO ensuring they complete the relevant section of the annual return that indicates that the fund is being wound up during the income year and finalising any outstanding tax liabilities at that time.

8. Receive confirmation from the ATO that your SMSF has been would up
   If everything has been done correctly, the ATO will send you a letter stating that they have cancelled your SMSFs ABN, and closed your SMSF records on their system.

9. Close your SMSF bank account(s) – Only AFTER you have received the ATO confirmation letter should you close your SMSF bank accounts. In some cases the SMSF will be entitled to receive a tax refund from the ATO upon completion of their final annual return. In this situation a bank account should be kept open to receive this refund . Alternatively, if the clients have met a condition of release then close the bank account and have the refund paid to an accountant’s trust account or to the clients’ account in trust and treat as a final commutation.
10. Post wind up expenses – Certain expenses may not fall due until after the SMSF is due to be wound up. Rather than keep the SMSF running and delaying the wind up process, the SMSF can be closed and the some cash can be retained on trust by the former trustees until the liability is paid.

The ATO also has a good online reference guide for winding up a SMSF at https://www.ato.gov.au/Super/Self-managed-super-funds/Winding-up/

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02 9899 3693, Mobile: 0413 936 299

• PO Box 6002 NORWEST NSW 2153
• Suite 40, 8 Victoria Ave, Castle Hill NSW 2154
• Suite 4, 1 Dight St., Windsor NSW 2756

Corporate Authorised Representative of Viridian Advisory Pty Ltd ABN 34 605 438 042, AFSL 476223

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

The Government announced in the May 2014 Budget that there will be an increase to the age pension qualifying age to 70 years. 

Effective 1 July 2025, the age pension qualifying age will commence rising by six months every two years, from the current qualifying age of 67 years to gradually reach a qualifying age of 70 years by 1 July 2035.

People born before 1 July 1952 will not be affected by this change as shown within the following table:

You need to clearly understand this does not mean that people will need to work to age 70, just that they will need to be self-reliant on their superannuation and other savings between retiring from the workforce and reaching age 70.

Our service proposition to those seeking advice is now even more relevant and we will work with you to control you finances so that the retirement date decision is under your control and not at the will of this or future Governments.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

It’s no use pointing out flaws in people’s strategies without also offering some form of solution. So I’ll do a bit of both.

In a recent survey of over 2000 people almost 1 in 3 women still feel they have “far from enough” money to maintain desired lifestyles in retirement. 68% of Australians do not factor in major future financial setbacks in their expectations on how much money
they will have in retirement and only 8.5% of participants had a well-considered plan for major setbacks. 

1. major health issues,
2. loss of employment and
3. lack of formal investment plan

A majority of respondents expect to have at least some or a major shortfall in retirement funding at their desired retirement age.

People are also ignoring some very relevant wealth destroyers like divorce, financially supporting elderly parents, and career break to raise children that were not seen as matters to worry about.

This may be a result of a lack of understanding of the rising costs involved in funding aged care, costs of single households and the massive gap in retirement funding that 4-5 years of lost contributions early on in a career can have on your retirement savings especially if you then move gradually back in to the workforce on part-time basis. I will deal with these in separate article.

You can find more details on the findings of the survey at the following link – MLC Wealth Sentiment 2015 Q3

Now as promised some solutions to consider:

Back-up plan for major health issues: 

• Private Health Insurance to manage medical and ancillary costs so you can get back to work sooner.
• Income Protection cover to ensure you and your family can continue to meet your living expenses including mortgage during prolonged sickness or injury. Tight budget? Then look to your superannuation for cover.
• Use the Retirement Protection Option within IP cover to ensure that you continue to build your superannuation during illness.
• Trauma insurance to ensure you have a lump sum to cover unforeseen costs or the short-fall on Income Protection. Often this will provide enough money so that a spouse can take some time off to help you recuperate or make it to appointments and aid recovery.

Loss of employment

• Stay connected. No matter how you love your job and your industry you need to be aware that the average person will have 5 mini careers in their lifetime so you need to be ready for change. Use LinkedIn to keep in touch with those who may lead you to your next career. It is easy to connect when you are comfortable in your job and much harder to make that connection when you are out of the workforce.
• Keep up to date. Nearly every job these days will involve some form of continuous education or professional development. Embrace the opportunities and see it as employment protection insurance. Employers will keep those who increase productivity and add value. New employers will embrace those who have a track record of stepping up to challenges and managing change well.
• Redundancy Cover – Redundancy cover pays a monthly benefit of 3 – 6 months if you become involuntarily unemployed. This benefit payment is intended to help you cover basic necessities and meet any pressing financial commitments whilst you are looking for new, full-time employment.

Lack of formal investment plan

It’s never too early to start planning but hopefully it is also never to late to be able to make a difference. The key is to use the tax and superannuation system to your advantage without taking on additional risk if possible. Start with some easy goals and low risk strategies like:

• Setting up a cash reserve savings account in the lower-income earner’s name and have funds direct debited on your pay-day so it’s automatically building up.
• Getting ahead on your mortgage payments using an offset and pay no tax on savings
• Salary Sacrificing to save tax and build wealth. Minimise your tax to the 15% bracket on all money saved. Concessional Limit is $35,000 this year for those over 49.

Advanced Wealth Creation:

When you have learnt the power of compound interest from the easy savings measures then consider stepping it up. Each of these strategies involves risk, but with increased risk comes increased rewards as you should receive a premium for taking on additional risk over time. That is the basis of capitalism and includes our stock market and property markets. Those willing to take on “researched, managed and targeted” risk get the rewards for their proactive strategy. This is not a suggestion to go speculative, it is all about measuring risk v reward on each investment over the longer term.

• In your 20’s to late 40’s take more risk in your investment strategies inside and outside of super. Look at the Growth and High Growth options. For anyone with 20 or more years to retirement your risk of losing with these strategies over that term is reduced.
• Introduce leverage either by borrowing for an investment property or margin loan for shares or consider a managed fund with internal gearing. This should be done before your 50’s not as you near retirement. Always leave 10-15 years for any gearing strategy to pay off.

Budgeting, Budgeting, Budgeting

Track your spending for 3 months and that means everything from that morning coffee to the sneaky Big Mac on the way home! When you review the costs they may be scary so look for small ways to cut costs like:

• Making your own lunch or buy a 24 pack of your favourite soft drink rather than buying individual cans from store or takeaway. You might laugh but one client saved $300 a month over 5 years and lost 15Kgs eating healthier over time. So boosted his savings and his quality of life!
• Buying a small coffee machine in the office and even one for home. We bought an ALDI Xpressi machine and it makes decent coffee for less than 50 cents a cup.
• Turning off all electrical items at home. this can reduce your power bill by 10% a year.
• Reducing your Pay TV bundle to the basics package or cutting it out for 3-6 months each year. Many offer no lock in contracts so use it to you advantage!
• Think before moving houses as this eats in to your wealth. Plan ahead and make sure that a property will suit you and possibly a growing or smaller family for 10-20 years.
• Think outside the box. Could you add a granny flat for extra income or could you buy a dual occupancy to share costs with children or parents in their later life.

These are just a couple of ideas. Visit the website run by a mate of mine and subscribe to their emails to get regular tips. The site is called Humble Savers

Here’s just a sample of their posts which minimise the jargon and give helpful tips:

Other valuable Posts

• Buying Your First Home
• Top Five Tips To Repair Your Credit History
• 5 Tips To Help You Create A Realistic Budget
• Five Ways To Save Money – To Be A Millionaire
• How To Get The Best Mortgage Deal Out Of The Banks

Once you work out your objectives and capital needed for your retirement you should consider seeing a Financial Planner to see what other strategies are available to you to boost your savings such as using a Transition to Retirement Pension and Salary Sacrifice strategy from 56 onwards to save on personal and superannuation tax and build your nest egg.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.