SMSF – Vesting Deed. Wind up your Self-Managed Super Fund

SMSF Vesting Deed Book Cover
  • SMSF Vesting Deed

  • $585 includes GST

 

Self Managed Super Fund Vesting Deed – wind up your Self-Managed Super Fund

No longer want to keep your SMSF? If so build this SMSF winding up kit. It allows you to legally end and wind up your Self-Managed Superannuation Fund.

Build this SMSF Vesting Deed. It formally wind ups (vest) your Self-Managed Super Fund.

Our SMSF Vesting Kit allows you to move from your existing SMSF to a retail public offer fund.

I don’t love my SMSF anymore

SMSFs are a lot of fun. But they are a lot of work. Perhaps you feel that managing a superannuation fund is a strain on your time. Perhaps you are sick and tired of the frequent government changes

9 reasons to wind up the SMSFvest smsf wind up smsf vest self managed super fund

  1. The relationship between the up to 6 members or directors has changed – fighting, divorced or dead
  2. You no longer have the time or interest to run the SMSF – working or travelling
  3. The fund’s investments are managed more effectively and cheaper with a public offer fund
  4. Your circumstances changed which affects your capacity to manage the SMSF – sick, dementia
  5. The laws and regulations governing SMSFs are too complex, and the effective management of the SMSF investments requires time and expertise, which the trustees does not have or has lost interest
  6. All the members and trustees left the SMSF, or want to leave – transferred their benefits to another fund or dead
  7. The SMSF has paid the members all of their benefits
  8. One or more of the SMSF trustees have moved overseas – no longer a ‘resident regulated superannuation fund’
  9. Not enough money left in the SMSF to make it viable

Two alternatives to winding up an SMSF:

  1. Appointing a Legal Personal Representative as Trustee.
  2. Converting to a ‘small APRA Fund. This is rarely done. This is because these professional trustee companies are expensive and show little flexibility. They often liquidate your property, sell your artworks and buy a balanced share portfolio. You might as well have wound up your SMSF and allowed a much cheaper retail super fund to look after you superannuation.

SMSF Deeds go out of date every 5 – 7 years

There have been many changes over the past few years. You have to update your SMSF Deed on a regular basis:

        1. Everything – Update Trustee, Upgrade Deed, Binding Nomination and PDS (Recommended)  
        2. Trustee only  
        3. Upgrade Deed only  
        4. Binding Nomination only – updates SMSF Deed as well  
        5. Product Disclosure Statement only – fully compliant with budget  

How to terminate the SMSF

1. You pay out or roll over the balance of the members’ super to another fund. This may involve selling SMSF assets.
2. A final audit is completed before you lodge the last SMSF annual return. Remember to indicate the SSMF is now wound up.
3. You pay outstanding taxes and other debts. This is before you close your SMSF’s bank account.
4. A resolution is passed by all the members. We provide this as part of the SMSF vesting kit. It states that the SMSF is to be vested (terminated).
5. The final accounts of the SSMF are prepared.
6. Build our Deed of SMSF Vesting. This vests and closes the Self Managed Super Fund.
7. Notify the ATO within 28 days stating: SMSF Name, ABN, contact person, date wound up. Send this information to: ATO, Post Office Box 3578, ALBURY NSW 2640. (The ATO cancels your ABN for you.)

SMSFs vs Public offer superannuation funds

 Different rules apply to public offer super funds compared with the more private SMSF. Only up to 6 people can be in a SMSF. In contrast a public offer fund can have 1,000s of members.

The 4 difference between a SMSF and a Public Offer fund:

1. With a public fund someone else is responsible

    • When investing in a public offer superannuation fund, your superannuation account is one of many.
      • This is under the one tax entity. It is professionally managed by trustees. This is in compliance with superannuation and taxation law. You are not responsible for the prudential regulations.
    • In contrast in a SMSF, you are the trustee:
      • You are responsible for how the fund works.
      • You ensure that proper records are kept.
      • You are responsible as to whether the SMSF is compliant.
      • This is with the many ever changings laws and regulations.
      • The members are responsible for updating the complying investment strategy.
      • You deal with the legal and tax issues.

2. SMSF has to do it own tax return, audit and investment valuations

Public offer funds take care of all your tax returns, audits, ATO audits and investment valuations. Forget about staying up to date with complex superannunation laws and legislation. 

You escape the paperwork.

3. Better protection from mistakes in a Public Offer Fund

In a public offer funds you have greater protection when something goes wrong. Since SMSF are responsible for their mistakes they do not get this protection.

SMSFs get no compensation if a SMSF members suffers losses. This is due to fraud or theft.

What about complaints and disputes? SMSF members resolve their own issues. This is expensive. There is no access to the Australian Financial Complaints Authority.

4. More choice of investments in a SMSF? Perhaps not…

In a SMSF you can invest in Bitcoin, racing cars, art works and homes that you will move into when you retire. Sure.

Public Offer funds do not have that choice. But few SMSFs invest in such exotics.

There are many Public Offer funds in Australia. They all provide a range of different services and opportunities for your super. That is a lot of choice in itself.

Many public offer funds provide a menu of investment options. You choose the asset class and the percentage of your super you wish to invest in. And the Public Offer funds often set out the risk-return profiles for each asset class.

You get many choices. These may include direct Australian Securities Exchange-listed shares, overseas shares, term deposits, exchange-traded fund, stocks and managed funds.

Build your SMSF Vesting Deed online. It includes:

  • Letter of Advice on the law firm’s letterhead signed by a Partner – setting out what you need to do to vest your SMSF
  • Deed of Variation to your SMSF. It ensures that your SMSF Deed now allows the vesting to take place
  • Minutes of SMSF Vesting
  • Certificate confirming the Vesting of the SMSF

Retaining documents of a vested SMSF

Even though your SMSF is wound up, you still retain these records for a minimum of 10 years:

  • minutes of meetings regarding the fund
  • notices of the change of trustees or directors of the corporate trustee, and consents to be SMSF trustees
  • copies of member and beneficiary reports.

And also keep your financial statements for 5 years.

Process to wind up and transfer an SMSF

The 9 steps to wind up a SMSF:

1. Build the SMSF vesting kit

The SMSF vesting kit amends your SMSF Deed. This is so you can complete and finish your SMSF in compliance to ATO and ASIC compliance. The kit sets out the procedure. Just press “Start Building” to start building the kit.

2. Written agreement and minutes to wind up the SMSF

All trustees or directors agree about the windup. The Minutes provided are signed by all the members and Trustee.

3. Pay existing member benefits

You pay out or roll over the balance of members’ SMSF superannuation to the Public Offer fund. Talk with our accountant and financial planner about selling assets and transferring SMSF assets. Consider selling the SMSF assets ton a member. This is an in-specie transfer. Such sales of SMSF assets must be done at a full and fair price.

4. Prepare draft financial statements

Your accountant prepares the final financial statements. They determine the value of each member’s benefits.

You transfer out the assets. Public Offer funds may be reluctant to take over your shares. They may wish you to convert the shares to cash. And only transfer (roll over) the cash to the Public Offer fund.

Pay all expenses.

Any minor amounts of money left over can be transferred to the Public Officer fund.

6. Final accounts and audit

Your accountant prepares a final set of accounts. The audit is completed. Your accountant then lodges the final SMSF annual return. Our SMSF Vesting Kit gives your accountant further advice and support for this. 

7. Tax and compliance

Pay outstanding taxes and other debts. And close the SMSF bank account.

8. Notify the ATO that you have closed the SMSF

Notify the ATO in writing. This is within 28 days of the SMSF being wound
up. You provide to the ATO:

    • SMSF name
    • Australian Business Number (ABN)
    • date your fund was wound up
    • person of contact.

9. Get rid of the Company as trustee of your SMSF

Your SMSF either has all members as the trustees of the SMSF. Or they have a company as trustee of the SMSF. This is called a “corporate trustee”. It is generally a “Special Purpose Company”. Most SMSFs have a company as trustee of their SMSF.

Either:

    • convert your company to a ‘normal’ company – so it is no longer a Special Purpose Company. And you can use the company for other purposes; or
    • Get your accountant to wind up the Company with ASIC (voluntary deregistration)

Tax implications when closing an SMSF

Speak to your accountant when winding up an SMSF. There may be GST, CGT, transfer (stamp) duty and other tax liabilities. Your accountant may be able to reduce such taxes and imposts.

To wind up your SMSF, the SMSF assets sold.. Or at least they are ‘disposed’ of for CGT purposes. This is achieved in 3 ways:

  1. sell assets to a member
  2. sell assets to the public
  3. transfer to the Public Officer fund (not common)

Irrespective of how your SMSF disposes of it assets the SMSF has to pay CGT on the increased value of the asset. The tax impact of this CGT event depends on whether or not the SMSF is paying retirement phase pensions and whether there are any carried forward capital losses. 

  • If you are in ‘accumulation phase’ then there is often a 15% tax on the capital gains (increased value) when you transfer them out of the SMSF. This may drop to 10% if you help the asset for over 12 months.
  • But being in pension phase does not mean you automatically escape these taxes.

In-specie transfer of assets to a member

Provided it is in the SMSF’s best interest to do so, and the sale (or transfer if in pension phase) is at fair market value then the SMSF can sell (or transfer) the SMSF assets to the members. Your accountant arranges the valuation BEFORE the sale (transfer) takes place. The SMSF auditor examines that valuation.

This is a CGT event. There may also by transfer (stamp) duty in the relevant Australian State or Territory.

Can SMSF losses be carried over from the SMSF to the Public Offer fund?

Sorry, no. Try and use both revenue and capital losses in the SMSF winding up process. They are lost when the SMSF is wound up.

Can I reopen a closed SMSF?

Q: Can a SMSF be reactivated?

A: No. Once a SMSF is wound up, it cannot be reactivated.

Once a SMSF is established (has assets) and then wound up, it cannot be reactivated. If the former members wish to once again have an SMSF, a new fund is set up.

Start closing your SMSF well before the end of the financial year

Try and close your SMSF well before the end of the financial year.

This is because if your closing processes crosses over into a new financial year, you need another SMSF tax return and audit.

Unit Trust Vesting Deed – wind up your Unit Trust

I should never have set up a SMSF to begin with

Q: My question is how can I go about closing down my SMSF and can you help with that?
I try reaching out to the people that convinced me to open it up but I feel they are not interested in helping me.

A: Self-Managed Superannuation Funds are like one-day-old babies. They need a lot of love and attention. They are time-consuming and expensive.

It seems that you may not done sufficient homework before you started your SMSF.

You need to go through a strict set of rules about winding it up and rolling over the superannuation to another fund.
This SMSF vesting kit takes you through the process.

Your accountant needs to prepare a balance sheet to show that the SMSF has no funds left in it. And you need an auditor to do the last audit of the SMSF. You have a journey ahead of you.

Have a look at the Sample document and there are many training videos and hints to help you as you build the SMSF Winding up kit.

For more legal advice telephone us. We are a law firm. We can help you answer the questions to build the SMSF Vesting Deed.

1What exactly is a Vesting Deed?

A Vesting Deed is used when you no longer want the Self-Managed Super Fund. You roll over the funds in your SMSF into another complying superannuation fund. This could be a retail or public offer fund. You need to formally wind up (vest) the trust to close down this unused structure.

Why should I wind up the SMSF?

– The Trust has achieved its original purpose
– It has no assets
– The trust has reached its vesting date

What do I need to do to terminate the SMSF?

1. The capital of the trust must be distributed in accordance with the trust deed.
2. The Trustee satisfies any existing liabilities of the trust. This includes any existing or future
tax liabilities that arise as a result of the termination of the SMSF.
3. The Trustee passes a resolution determining that the trust is to be vested (terminated).
4. The final accounts of the trust, including a final tax return, are prepared.

Once this is done, you build our Deed of Vesting of an SMSF. You gt a set of documents which allows you to vest and close the SMSF.

After building this document on our website you are emailed:

1. SMSF Deed of Variation of Vesting
2. Minutes
3. Letter of advice


2Why should I wind up the Trust?

Why should I wind up the SMSF?

– The Trust has achieved its original purpose
– It has no assets
– The controllers of the trust don%u2019t want to continue
– The trust has reached its vesting date


3What do I need to Vest my Trust?

What do I need to do to terminate the SMSF? Why vest?

1. The capital of the trust must be distributed in accordance with the trust deed.
2. The Trustee must satisfy any existing liabilities of the trust. This includes any existing or future
tax liabilities that arise as a result of the termination of the trust.
3. The Trustee must pass a resolution determining that the trust is to be vested (terminated).
4. The final accounts of the trust, including a final tax return, must be prepared.
5. Build this document


4Why do you need the SMSF name?

To vest your SMSF, we need to first identify it. We do this by referring to:

the SMSF Trust name (e.g. Jones SMSF)
date the SMSF Deed, that established the Self-Managed Superannuation Fund, was signed

Every trust has a name. Sadly, they are generally quite boring. E.g. Smith SMSF, named after Mr Smith.

The SMSF name is a ‘nickname’. It is not registered anywhere. It just helps you and your accountant identify your SMSF.

Take out your Deed of Trust that first started your SMSF. Have a look at the front cover, it will normally have the name of your SMSF. It is repeated in the body of the Deed as well. Check any subsequent Deeds of Variation, to make sure that your SMSF didn’t change its name.

Be careful to not confuse the SMSF name with your Trustee. Your Trustee (e.g. XYZ Pty Ltd) is not your trust name.

Because you are building your Deed of Variation at our law firm’s website you:

1. retain legal professional privilege

2. are protected by our law firm PI insurance

3. receive legal advice

4. by law have us act in your best interests, over our own

Only a law firm provides the above.


 









Legal Consolidated Barristers & Solicitors Australia Brett Davies

Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm

National:   1800 141 612
Mobile:      0477 796 959
Email:       [email protected]