This article will guide you through the recommended steps when winding up a SMSF on Class.
Ensure you have first carried out the following:
- All transactions for the fund have been entered and processed up to the date of wind up; and
- Any liabilities and or receivables for the fund have been accrued
Steps to Wind Up
Navigate to the Fund Level > Fund > Fund Details
- Click Edit and enter the fund End Date (date of winding up - this cannot be a future date)
- Navigate to Settings > Fund Defaults, select New Fund Policy to create a fund policy as at 1 July for the year in which the fund ceased. Set Use Tax Effect Accounting to 'No'.
- Ensure all the investments have been disposed of. This includes disposing of investments the were transferred off-market. All investments must be disposed prior to completing step 5. Refer to Listed Security Disposal for further guidance
- Ensure any outstanding debtors, creditors and/or tax balances have been accrued and cleared. You can clear accruals by processing a cash transaction and matching it to the accrued/outstanding business event. The following transactions will likely need to be accrued:
- Accounting, Administration & Audit Fees
- Actuarial Certificate Fees
- Interest yet to be credited
- ATO Payments and refunds, such as PAYG Instalments, BAS payments etc.
- Run a Period Update to the day before the wind up date to ascertain member balances. The obtain an Actuary Certificate if fund had pension balances and the segregated method is not being used to calculate ECPI. For segregated funds, after running the Period Update, please add in a new Asset Pool Structure and move all the member accounts and investments into the default pool.
- If an actuary certificate was required, roll-back and re-run Period Update once the actuary percentage has been obtained and recorded in the New Fund Policy under the field Pension Exempt % (Actuarial) (refer to step 2)
- Commute any existing pensions to accumulation or lump sum payment, as at wind up date. Alternatively, clear the total existing pension balance by entering a Pension Drawdown event to exhaust the pension account to nil, as of the wind up date. For Transition to Retirement Accounts (TRIS), the pension can only be commuted back to accumulation
- Process a Rollover Lump Sum/Out as of the wind-up date, to rollover or pay out member balances in full
- If rollover cash payments are yet to be paid out from the cash account, navigate to Transactions > Browse Bank Statements > +Add and process a 'Cash Out' payment for the amount of the Rollover as of the date of wind-up. Then navigate to Transactions > Match Transactions, and match the Rollover Lump Sum/Out event with the 'Cash Out' payment from the Cash Transactions side
- First ascertain the Tax Provision amount by navigating to Reports >Trial Balance. Clear tax balances, by processing a Fund Income Tax Payment event, for the relevant tax provision amount as of the date of wind up. Then navigate to Transactions > Browse Bank Statements > +Add and process and 'Cash Out' (liability provision) or 'Cash In' (asset provision) for the total tax provision amount. Then navigate to Transactions > Match Transactions, and match the Fund Income Tax Payment event with the payment/refund from the Cash Transactions side
- Run a Period Update on the date of wind up. (Do not rollback the previous Period Update)
- Run a Tax Finalisation, to generate the Annual Return. If the Annual Return is not available for the relevant financial year of winding up, you can use the prior year SMSF Annual Return stationery to produce the tax return and lodge manually. Class will allow funds to lodge the return electronically on or after 1 July.
- Suspend Fund, by navigating to Fund > Fund Details > Edit > Suspend. This will cease the billing on Class
- One bank account that is still open to pay out the rollover to the new fund or lump sum/pension payment out to the members and,
- the member accounts
- For segregated funds, after step 5, you will need to remove any asset pools
- The Audit of the Annual Return must be completed prior to lodgment
- In the Annual Return Section A, Question 9, you need to answer 'Yes' to the question 'Was the fund wound up during the income year?'
- The fund net assets should be nil when you wind up, therefore even if you have tax refund or some assets remaining, it should be matched with a rollover/expense payable