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  • Luis C

When to wind up an SMSF, and what to consider

While all the attention seems to be on educating prospective trustees on when is a great time to start an SMSF, I thought it would be a great idea to understand when it might be a good time to wind up an SMSF. But also, because no one is ever talking about winding up an SMSF early into the new financial year. Rather than planning ahead, it's often left until the last quarter of the financial year.

In my experience, even though I've seen many reasons, these are the main ones;

  • The SMSF balance is getting too low. That is, the costs of running the SMSF are outweighing the (real or perceived) benefits.

  • The trustees are showing signs of incapacity.

  • There has been a death of a member, and the remaining member is not interested in running the SMSF.

Even though these are the main reasons for winding up an SMSF, there are some considerations that need to be taken into account;

  • Can a new member be added to the SMSF to boost the balances? Think of other family members such as sons & daughters, but also on the flip side, make sure they are always covered by life insurance upon entering/exiting super funds.

  • Are there tax or capital losses being carried forward that can benefit new members being added?

  • Can the member showing signs of incapacity be rolled over to an industry fund?

  • Can the SMSF be converted to a small APRA fund?

If the decision is made to wind up the SMSF, the process can be quite tricky (and will be the subject of one of my future articles!), however, the more time you have to navigate any unexpected issues, the easier it will be to administer the wind up.

If you need any guidance on how to wind up the SMSF, please feel free to reach out to me.

But finally, and I've deliberately left this until the end of the article, if there is only one thing you take away from the article it's this; never do anything until you've consulted with the SMSF deed. It's the rule book that the trustees must abide by!

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