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Thinking of closing down your SMSF?
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Published on 17 May 2023Let others do the hard work, while you still maintain control.
Who winds up a SMSF?
It's not uncommon for people who once had an SMSF to eventually wind them up and leave the paperwork in the hands of industry super funds. Previously, this was mostly SMFSs under $1million, but ATO data shows that more and more large holdings are also transferring to industry super funds.
The same ATO[i] data shows investment performance by SMSFs. We will leave you to draw your own conclusions on these numbers -
Investment returns
| SMSF size | 2021-22 | 2020-21 | 2019-20 | 2018-19 | 2017-18 |
| $1 - $50k | -21.0% | 1.8% | -22.0% | -19.8% | -15.6% |
| >$50k - $100k | -13.1% | 8.0% | -10.9% | -8.6% | -4.9% |
| >$100k - $200k | -5.0% | 10.4% | -5.9% | -2.6% | -1.0% |
| >$200k - $500k | 0.8% | 15.2% | -1.9% | 2.9% | 3.7% |
| >$500k - $1m | 0.7% | 17.2% | -0.9% | 5.9% | 6.0% |
| >$1m - $2m | 0.3% | 17.5% | -0.4% | 7.0% | 8.4% |
| >$2m-$5m | 0.5% | 18.3% | 0.5% | 7.5% | 7.8% |
| >$5m-$10m | 0.6% | 19.0% | 1.3% | 7.5% | 8.2% |
| >$10m | 1.3% | 21.5% | 3.3% | 7.7% | 9.0% |
Of course, it is always possible that this trend may change in the future.
What are benefits of an industry super fund?
Two key benefits of investing through an industry super fund like Prime Super are time and obligations.
According to ASIC estimates[ii], the average SMSF trustee can spend over 100 hours a year managing their SMSF. That's around one full working day per month. And then there are the penalties that can be imposed if obligations aren't met, rules are not followed, and/or mistakes are made.
If the time spent managing (or the worrying) about your SMSF administration gets too much, industry super funds are an alternative.
Prime Super gives you control without the time commitment
Like many industry funds, Prime Super can make superannuation less time-consuming than having an SMSF, while still giving you some options for your investments, such as being able to choose or change asset classes anytime, via your online portal MemberOnline.
We even offer easy access to property, and alternative asset investment options so you can benefit from investing in those sectors, while avoiding having to make a big commitment on purchasing a single asset such as an entire investment property.
Best of all, you control all of your super online, 24/7 from wherever you have internet access.
How to wind up an SMSF?
The following steps provide an outline for closing your SMSF and transferring your funds to a trusted, member-focused super fund such as Prime Super.
Step 1.
Read your SMSF trust deed[iii], it may contain important information about winding up your fund. Make sure all your activity statements are up to date including minutes, and contribution details.
Step 2.
Prepare the super for payout or roll over - you might need to sell the SMSF investments[iii],. While shares and other liquid assets can be converted to cash easily, property can take longer. Importantly, don't let emotion or nostalgia get in the way of sensible investment thinking during this step.
Step 3.
Join your new super fund - this is easy. Just head to the join page on your preferred super fund's website, such as Prime Super. If you are at the pension stage, you can easily set up a new pension account for your retirement income.
Step 4.
Roll over or payout the money[iii]. You can transfer most of the money straight away, as long as you leave enough for final bills and expenses (see below). Once you've joined up, your new fund will be able to advise on how to transfer your super, and choose your investment options.
Step 5.
Arrange for a final audit[iii]. You'll need to arrange for a final closing audit to be completed by your SMSF auditor. Make sure there are enough funds in reserve to pay for this, along with any outstanding bills and taxes.
Step 6.
Lodge the final tax return[iii]. You (or your accountant) will need to lodge a tax return with the ATO after the end of the financial year. Your accountant should be able to provide an estimate of the tax your SMSF is likely to be liable for, and again, these funds should be kept in reserve and not rolled over to your new super fund. You'll also need to notify the ATO that the SMSF is closing.
Step 7.
Close the SMSF bank accounts[iii]. Make sure all liabilities have been settled, you have notified anyone who pays into it (e.g. employers) that the SMSF account is closed and provided new payment details.
Step 8.
Close the trustee company[iii]. Once you have been notified that your SMSF ABN has been cancelled by the ATO, you may also want to wind up any trustee company structure that Is linked to the SMSF. Chat with your legal advisor or SMSF manager about how to do this.
Sit back and let others do the hard work.
When all the funds have finally been transferred, and your super is being managed by full-time investment and administration professionals, it's time for you to sit back and enjoy the benefits. And remember, when your super is with Prime Super, you can decide how your money is invested thanks to the diverse range of investment options available to our members.
For more information, check out the ATO guide[iii] to closing an SMSF, or get in touch with Prime Super by phone on 1800 675 839 or arrange a chat with one of our super specialists at a time suitable to you.
[ii] https://download.asic.gov.au/media/5727427/asic-smsf-factsheet-expired.pdf
