Super Mews March 2015 Winding up an SMSF

MARCH 2015 www.bdo.com.au

While we focus on SMSFs and what trustees can and cannot do with their SMSFs, there might come a time when you determine that the SMSF no longer meets your needs.

WINDING UP A SELF MANAGED SUPERANNUATION FUND (SMSF)VIABILITY, IS A SMSF RIGHT FOR ME? OR RIGHT FOR ME NOW?

While we focus on SMSFs and what trustees can and cannot do with their SMSFs, there might come a time when you determine that the SMSF no longer meets your needs. This will mean that you may need to wind up your SMSF now or sometime in the future. This could happen for a number of reasons:

• All the members and trustees have left the SMSF

• All the benefits have been paid out of the fund

• It no longer meets your needs

• You don’t have the time, skill or knowledge to manage the fund

• It’s not cost-effective

• You decide to relocate overseas

• A relationship between fund members breaks down

• The ATO have directed you to wind up the fund.

If you are considering winding up your SMSF you need to deal with the members’ benefits and finalise the fund’s reporting responsibilities. Below is a checklist which can be used when winding up the SMSF:

TRUST DEED

Your fund’s trust deed is the first place you should check it will detail what is required for winding up your fund.

Agreement by trustees

Each trustee should agree in writing:

1. That the fund is to be closed

2. The disposal of the investments (sale or transfer)

3. The member’s benefits are to be paid out.

Disposal of Investments

Trustees need to consider how to realise the investments on hand. In particular consider how to arrange the disposal of assets such as:

• Listed securities

• Unlisted securities

• Securities which are frozen or in administration.

Listed securities generally speaking are easy to sell on market, however unlisted securities and investments which are frozen or in administration may be more problematic. Consideration is required as to how to deal with these types of investments.

If the investment is unable to be sold to an external party then a possible solution is to dispose of the investments through the use of an off market transaction. Bearing in mind that any transactions must be at market value and should ensure that you have sufficient evidence to support the value used.

2 SUPERNEWS

Disposal of investments using off market transfers must ensure market value is used and that the cash is paid into the superfund within a couple of days of the transaction. If eligible a member may be able to receive their final benefit in the form of cash and or assets of the fund transferred in specie. (Note it is extremely important that you first check the fund’s trust deed to ensure you are eligible to pay the benefit in this way and it must also be at market value).

MEMBER’S BENEFITS

Each member must confirm how and where they want their benefits paid or dealt with.

If the member is transferring to another superannuation fund, they need to:

• Confirm details of the receiving superfund (including account/member number)

• Confirm how the benefits are to be paid , cash or cash and assets transferred in specie (if eligible).

If the member is in accumulation phase are they eligible to access the benefits? That is, have they met a condition of release? If they are eligible and can access the benefits as a lump sum how do they want to receive the benefits?

• Cash

• Cash and /or assets transferred in specie.

If the member is under 60 years of age, the trustees must also calculate any income tax payable on the lump sum (if applicable).

If the member is in pension phase, the trustees will need to ensure the minimum pension has been paid up to the point where the account is to be closed (ie on a pro-rata basis).

Other Considerations are:

• Does the member want to transfer their account to another superfund and continue to pay a pension. (Note for Centrelink purposes, the pension in the new superfund will be a new pension or income stream).

• Does the member want to stop the pension and withdraw the balance as a lump sum (provided they are eligible to access the benefit in the form of a lump sum). If they are eligible and can access the benefits as a lump sum how do they want to receive the benefits?

- Cash

- Cash and /or assets transferred in specie

• If the pension is a lifetime / fixed term complying pension it can only be transferred to another superfund to acquire another complying pension.

SMSF WIND UP RECORD KEEPING

On the wind up of a superannuation fund final Financial Statements, Members Statements, Income Tax Return and final fund audit need to be prepared and completed. The financial statements must:

• Account for all income and expenses to the date of closure of the fund

• Factor into the statements the expenses to complete the wind up process, for example:

- Accountancy fees

- Audit fees

- Supervisory levy

- Actuary certificates

• Calculate tax on income and capital gains derived to the date of closure of the fund. This will include gains on investments still to be sold and calculate the tax effect of those sales.

3

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

BDO refers to one or more of the independent member firms of BDO International Ltd, a UK company limited by guarantee. Each BDO member firm in Australia is a separate legal entity and has no liability for another entity’s acts and omissions.

BDO is the brand name for the BDO network and for each of the BDO member firms.

© 2015 BDO Australia Ltd. All rights reserved.

FOR MORE INFORMATION

ADELAIDE

SHIRLEY SCHAEFERNational Leader, SuperannuationTel: +61 8 7324 [email protected]

BRISBANE

PAUL RAFTONPartner, BrisbaneTel: +61 3237 [email protected]

CAIRNS

MICHAEL STEELEPartner, CairnsTel: +61 7 4046 [email protected]

DARWIN

RICCARDO DILETTOSOManager, DarwinTel: +61 8 8981 [email protected]

HOBART

ANDREW PARSONSManager, HobartTel: +61 3 6234 [email protected]

MELBOURNE

ROD NAISMITHPartner, MelbourneTel: +61 3 9603 [email protected]

PERTH

PAT KELLYSenior Manager, PerthTel: +61 8 6382 [email protected]

SYDNEY

KIM O’BRIENPartner, SydneyTel: +61 2 8536 [email protected]

SUPERNEWS

Tax Return

Prepare the final return ensuring the status of the fund as ‘closed’ is completed on the front cover of the return.

The members schedule must be completed correctly showing the status of each member as being closed.

Audit

Organise for the fund’s auditor to audit the fund for the final year. The audit process should be similar to the prior year’s however they will require to sight documentation for the following for the after cut off point transactions:

• Sight bank statements from the cut off point to when the bank account has been closed

• Confirmation of the benefits paid to the members

• Confirmation of the benefits transferred to another superfund

• Confirmation the final liabilities as at the cut off date has been paid in full

• Confirmation that the ATO have been notified the fund has been closed.

ATO

Once the audit has been completed the final return can be lodged.

Notify the ATO in writing the fund is wound up within 28 days.

Bank Account

Once the final liabilities have been paid and any debtors, tax refund have been deposited, the fund’s bank account can be closed.

If you have any queries please don’t hesitate to contact your BDO Super Adviser. Our team can assist you with the fund closure process as well as providing some advice about winding-up or continuing with your SMSF.

This publication should be used as general advice, you should always seek the advice of a professional in regards to your personal circumstances.

Super Mews March 2015 Winding up an SMSF

Services

Transcript of Super Mews March 2015 Winding up an SMSF