Towards retirement, individuals may consider switching from their self-managed super fund (SMSF) to a different type of super fund.
There are 2 key reasons why an SMSF fund may not be ideal towards and during retirement:
- SMSF funds are time-consuming and require the trustee to regularly stay updated with the market and implement any changes to investment themselves. For some, this may be stress-inducing and contrary to the relaxation they desire during retirement.
- SMSF funds have ongoing costs which do not apply to other types of super funds. Although these may be affordable when one is working, they may no longer be feasible during retirement.
You may choose to wind up your SMSF if the above reasons particularly resonate with your circumstances. Remember that once a fund has been wound up, it cannot be reactivated, so this decision is vital.
The first step in winding up your SMSF account is to complete any specific requirements set out in the trust deed pertaining to winding up the fund. You will then need to decide whether you want a payout or for the funds to be transferred to another super fund (you will need to choose and create the super fund account).
Regardless of whether you choose to pay out or transfer to another fund, you will need to leave a sufficient amount of funds in the SMSF to pay final taxes or expenses. Then, appoint an SMSF auditor who can conduct the final audit. You will need to complete and lodge the final SMSF annual returns and details about the wind up to the ATO.
Once you have paid any outstanding tax, settled liabilities and ensured that you have received requested refunds, you are able to close the fund’s bank account.
This process can get complicated depending on the relationship between trustees, therefore obtaining expert advice on the best route may be beneficial.