How to way to close your self-managed super fund

An irony of self-managed superannuation is that often it takes a lot more work to close a fund than in setting it up.

And while it is crucial to get things right when establishing your SMSF, it is just as crucial when winding it up.

"It is particularly important to complete all of the reporting obligations correctly," says Andrew Yee, director of superannuation at accountancy group HLB Mann Judd.

"It can be a bit tedious but it's essential if you don't want to risk being hit with penalties."

Yee stresses the precise details of the wind-up process will vary depending on the circumstances.

But there is a range of issues all trustees have to deal with when closing a SMSF. They are (in order):

• The trustees need to pass a resolution to wind up the fund and record members' requests, stating what to do with their entitlements. These requests must meet relevant rules, particularly preservation.
   
• Before any further action, check whether your fund's trust deed includes unusual wind-up requirements.
   
• Begin the process of selling the fund's assets to convert them to cash before each member's entitlement is rolled over to another fund or paid out, if permitted. Check whether any member wants their entitlement in specie, that is, as a non-cash transfer. This is sometimes possible.
   
• Compile all the relevant records for the current financial year to enable your accountant to prepare the fund's final financial statement and tax return and to organise to have the fund audited. Any accrued accountancy and other fees, as well as tax liability, should be included.
   
• If a member is receiving an account-based pension you will need to pay at least the minimum annual pension based on the number of days in the financial year he or she will have been a member of the fund (that is, up to the official termination date of the fund).
   
• Using the fund's final financial statement, prepare rollover benefit statements to facilitate the transfer of each member's entitlement to a new super fund, as appropriate. If the entitlement is no longer preserved, the money can, if requested, be paid directly to the member.
• Notify the tax office in writing that the fund has been wound up. This should be done within 28 days of the date of the wind-up and should include the fund's Australian business number, the date of the wind-up and a contact number in case the tax office has any queries. The tax office will cancel your ABN.
   
• Hold the fund's bank account open due, in part, to the possibility of a tax refund. Only when you are confident no more money is due to the fund, or payable by it, can you then organise the final rollover of entitlements. Then you can close the account and provide members with exit statements showing that each of them has a zero balance.

Shifting your SMSF

It is important to be aware there are usually exceptions to the superannuation rules.

I forgot this when writing my tip on super portability for the August edition.

Whereas portability - the right to shift your accumulated super entitlement from one fund to another - applies to the vast majority of fund members, it doesn't, as I claimed, apply to everyone.

The main exceptions are usually members of unfunded public sector funds (funds where the employer's obligations effectively are financed from consolidated revenue when the benefit is paid); members of defined benefit funds who are still employees of the contributing employer; and members of self-managed super funds.

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