Getting Out Of A Self-Managed Super Fund

Getting Out Of A Self-Managed Super Fund

Before setting up an SMSF it is also necessary to have a strategy in walking away from it to avoid costly disagreements or conflicts in the future. There are various and several reasons why people decide to get out of a Self Managed Super Fund.

Some of these reasons include:

  • The trustees do not have enough time, resources, expertise and interest in running the SMSF anymore. If the members of a Self Managed Super Fund no longer have the time to manage their fund anymore, either because they are busy with other business activities or have found other investment options which they focus their time on, they can choose to get out of an SMSF. Sometimes other reasons may be the cause of leaving the fund. This may include lack of financial resources to fuel the fund’s activities, lack of expertise to run it well and properly and the lack of interest in running the fund.
  • There was a breakdown of a relationship between one or more of its members. If a business relationship breakdown happens between members of the fund, and the members no longer speak in good terms and one or more members want out of the fund, the member can choose to leave or get out of the fund if they are no longer comfortable working with their fellow members or trustees.
  • There are no longer enough funds in the SMSF to cover and pay off the ongoing operating costs of the fund. If sudden financial problems have affected the funds of running a Self Managed Super Fund and members can no longer afford to pay off ongoing operating costs, there might be a need to get out of the fund or wind up the fund. Not having financial resources to fund an SMSF’s operations is a big issue why many SMSF are wounded up.
  • All members of the fund have moved to another fund or have died. If other members of the fund have moved to other super funds or have died and their death benefits have been claimed by their beneficiaries, it is best to wind up the fund.
  • The fund has paid the members all of their retirement savings and benefits. If the fund has paid off all of the retirement benefits it needs to pay to its members, the purpose of the fund has already been served. Therefore, winding it up may be an option.
  • One or more of the members have relocated overseas. An SMSF trustee who is relocating overseas for a long time might breach the residency and compliance status of a Self Managed Super Fund. It can also affect its ability to receive tax concessions. The SMSF needs to be an Australian super fund at all times. If it does not satisfy residency rules, it becomes non-compliant. In this case, the assets and income of the fund will be taxed at the highest possible rates. If a fund was given a non-complying notice, it will be unable to become a compliant fund again.

Each trustee or member of the fund is legally responsible for all decisions made for the fund and these obligations cannot be outsourced to another member or professional administrator. If you are not able to run the SMSF anymore, you should either leave the SMSF or wind up the fund.

A breakdown in a relationship between one or more members of the fund may affect the ability of a member to effectively do their obligations as a member or trustee. If a member chose to leave as a result of this event, their benefits should be rolled over to another complying super fund. The Self Managed Super Fund does not have to be wound up but might need to be restored for it to meet the requirements of an SMSF.

What to do to get out of a Self Managed Super Fund?

When getting out of a self-managed super fund, it is recommended to plan it carefully to minimise costs and risks to the member’s retirement savings. To get out of an SMSF you need to:

  • Notify the Australian Taxation Office within 28 days before you leave the fund.
  • Deal with all assets of the fund to make sure that the fund will have no assets left.
  • Arrange a final audit for the fund.
  • Complete all reporting responsibilities prior to getting out of the fund.

Conclusion. If you decide to get out of a Self Managed Super Fund make sure that you do the things needed or required when getting out of the fund. Not doing so will not completely and fully let you out of the fund. If you have not complied with the necessary processes needed to get out of the fund, you will still be part of it and, therefore, be liable for any non-compliance like the other trustees. Notify the ATO, deal with your assets, arrange for a final audit and complete all reports required to officially get yourself out of the Self Managed Super Fund. If you’d like to know more about SMSF and how you can benefit from it, you can seek the advice of a professional or an SMSF auditor.

Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit,  and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.

Call our Melbourne team today on 03 9088 2242, or email us via  audit@kingstonknightaudit.com.au.

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