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Overview


Winding up of a super fund requires dealing with and disposing all of the fund's assets so that none remain, and completing all the reporting and administrative obligations of the fund:

  • Complete any requirements that the trust deed specifies about winding up the fund;
  • The trustees need to arrange for all investments to be sold and deposit the money into the super fund’s bank account;
  • Pay out or rollover all super benefits (leaving a sufficient amount to pay final tax or expenses if required);
  • Appoint an approved SMSF auditor to complete the final audit;
  • Complete and lodge the final SMSF annual return (including wind up details);
  • Pay any outstanding tax liabilities of the fund;
  • After all expected liabilities have been settled and requested refunds are received, close the fund’s bank account.


Summary

Winding up Funds in SF360:

There are 5 main steps that should be followed when winding up a superannuation fund in SF360:

1. Process ALL transactions for the fund

2. Determine the final tax payable by the fund

3. Pay the income tax and make any adjustments to tax accounts

4. Pay Members out in FULL or Rollover Benefits to a Complying Superfund

5. Create Final period end entries for the fund and produce the annual return

 

Where an SMSF is wound up during the Financial Year you will need to use the prior year's SMSF Annual Return stationery to produce the tax return and lodge manually (paper).

The ATO does not usually release the PDF version of the SMSF Annual Return until June and will allow funds to lodge the return electronically on or after 1 July.

Step 1 - Process all transactions for the fund


The first step to winding a fund up requires all of the entries for the current period (up to the date of the wind up) to be processed via manual Transaction Input or uploaded and matched using SF360's Connected Services and Transaction Matching features. 

  • All disposals of Assets will need to be processed so the investments show nil quantities. SF360 will then know to reverse any revaluation/devaluation differences when the final create entries is processed.
  • Turn off Tax Effect Accounting 
  • Where a member is in receipt of a pension, ensure that the minimum pro-rata pension payment has been paid
  • For Pension funds, ensure that fund has applied for and received an actuarial certificate. See Fund Pension Policies
  • Where the fund is paying market Linked or defined benefit pensions, this pension will need to be transferred to another complying super fund. 

 

Step 2 -  Determine the final tax payable by the fund


After completing step 1, the final tax position of the fund needs to be determined. This is done by completing The Create Entries Process up until the day prior to the wind up date. The Create Entries process will make any necessary adjustments for excess franking credits and capital gains/losses from the sale of the fund's assets.


Do not close your bank accounts until all expected final liabilities have been settled and requested refunds are received. Tax liabilities (including the Supervisory levy) can be paid when you lodge the SMSF annual return.

 

From the Main Toolbar, go to Compliance.

Select Period compliance from the list.

Follow these steps to complete the Create Entries to wind up date:

  1. Under the Create Entries Period heading, input the financial period as 01/07/2013 to the day before the wind up date of the fund (in this example, the day before is 31/12/2013). 



  2. Now select Create Entries.

  3. The Create Entries will appear in the Create Entries table below (select the image to enlarge it). 

Step 3 - Pay the income tax and make any adjustments to the tax accounts


Ensure all prior year financial statements, tax returns and other tax and compliance obligations have been finalised before proceeding. 

The final entries that are required to be posted are to pay the fund's income tax and to make any adjustments to the Provision for Deferred Income Tax account (Account 89000).

PDIT Writeback


To confirm the outstanding PDIT amount for the fund, use the trial balance under Live Reports and check account 89000.


This step will only be necessary if the Fund has been using Tax (Effect) Accounting in SF360 as the sale of the assets will have posted entries to the Provision for Deferred Income Tax account and other entries throughout the life of the superannuation fund.

 

Tax Effect Accounting can be switched on under Fund Details | Reporting.

 

From the Main Toolbar, go to Fund.

Select Fund details from the list.

 

Under the Reporting section, select Tax Effect Accounting.

 

  • Include realised Capital Losses in PDIT/FITB and
  • Include unrealised Capital Losses at 10% 

 

Will be ticked automatically (cannot untick). 

 

 

Select Save

 

From the Main Toolbar, go to Accounting.

Select Transaction list from the list.

Select the New Transaction.

Select Journal.

 

From the General Journal screen you can write back the deferred tax liability:

 

DateInput 01/07/2013 (current financial year)
ReferenceInput a reference
DescriptionInput PDIT Writeback
Input AccountSelect account 89000 - Deferred Tax Liability
AmountInput the PDIT amount remaining
Input AccountSelect account 49350 - Writeback FITB/PDIT
AmountInput the PDIT amount remaining.
SaveSelect Post

 

Income Tax Payable/Refundable


To confirm the outstanding Income Tax Payable/Refundable amount for the fund, use the trial balance under Live Reports and check account 85000. Below are two examples, one detailing a final tax payment and the other detailing a tax refund scenario. 

Refer to the ATO website for information on whether the wound up fund will pay a supervisory levy for the wind up year. for financial years 2015 - 2017 the fund will not pay a levy. In our example of the 2014 year, the fund will pay a $129 levy. Input  $0 in the SMSF Supervisory Levy field in the Tax Instalment More Details Panel for funds wound up in the 2015 - 2017 financial years.  


From the Main Toolbar, go to Accounting.

Select Transaction list

Select New Transaction.

Select Bank Statement.

Transaction Details - Payment Example

In this scenario the fund made a payment for a tax payable liability of $1,000.

AccountAmount
30400 - ATO Supervisory LevyDR $129.00
85000 - Income Tax PayableDR $1,000
60400 - Cash at BankCR $1,129

 

  1. Input the date (01/01/2014) and a reference number. You can include a description in the Description box. 

  2. Under the Account heading, select the bank account from the Input Bank Account box. Next, type 85000 into the second account box and select Income Tax Payable from the drop down list. 



  3. Input the payment amount as a debit ($1,129). 



  4.  Select the More Details Panel and set the Financial Year as 2013-14, the levy will now calculate at $388. Change this amount to $129.

    Financial Year

    The Financial Year can be set to any year except the current Financial Year. Setting it to the current Financial Year will result in the PAYG and non-deductible amounts in the final return being incorrect.

     

  5. Select Save to post the transaction. 

Transaction Details - Refund Example

In this scenario the fund received a refund of $1,000.

AccountAmount
30400 - ATO Supervisory LevyDR $129.00
85000 - Income Tax PayableCr $1,129
60400 - Cash at BankDr $1,000

 

  1. Input the date (01/01/2014) and a reference number. You can include a description in the Description box. 

  2. Under the Account heading, select the bank account from the Input Bank Account box. Next, type 85000 into the second account box and select Income Tax Payable from the drop down list. 



  3. Input the refund amount as a credit ($1000).



  4.  Select the More Details Panel and set the Financial Year, the levy will now automatically calculate at $388. Change this amount to $129. 


  5. Select Save to post the transaction. 

Step 4 - Pay Members out in full or Rollover Benefits to a Complying Superfund


After paying the fund's income tax and writing back PDIT (if applicable), the only balance remaining in the fund should be the balance of the member accounts and any fees left for audit, actuary and accounting expenses (where applicable). Each member must notify how and where they want their benefits to be paid, specifically whether they want their benefits to be rolled over to another super fund or paid out as a lump sum. Benefits can only be paid out as a lump sum if the member satisfies a Condition of Release


Therefore we need to pay the members out in FULL or rollover member balances into a complying Superannuation Fund. See How to Enter Rollover or Lump Sum Payments for further details. Ensure the date of the payout is recorded as the date of the payment/rollover.

 

Pension Accounts

Pension accounts to be rolled over to another fund or paid out need to be commuted back to accumulation prior to the rollover or payout. See Commutations for assistance.

 

Rollover/Lump Sum payments are recorded through the Transaction List. Selecting account 46000/MEMBERCODE will prompt SF360 to present you with the Rollover Payment Details section. This will allow you to easily record all the components of the Rollover payment, all on the one screen. 

 

Important

Ensure you have completed The Create Entries Process in step 2 prior to posting a lump sum payment partway through the year. This will ensure member balances are up to date prior to the rollout/transfer.

 

From the Main Toolbar, go to Accounting.

Select Transaction list

  1. From the Transaction List screen, select New Transaction. From the drop-down list, select Bank Statement

  2. Input the date of the wind up (01/01/2014) and a reference number (SF360 will automatically produce a reference number, but it is editable). You can include a description of the transaction in the Description box.

  3. Under the Account heading, select the bank account from the Input Bank Account box. Next, begin typing and select account 46000/MEMBERCODE (select the member recording the payout or rollover payment) from the Input Account Box

  4. Input the final member's balance at the date of the rollout. SF360 will post a corresponding entry to the bank account fields on the screen  (if you post a Debit amount to the other account, SF360 will post a Credit to the bank for the same amount, and vice versa). 

Input the Rollover payment details in the Rollover Payment Details section that appears below. 

Type of Payment

To prepare the Rollover Benefits Statement (RBS forms), select Transferring from one Super Fund to another.

Member

Select the correct MEMBERCODE.

Rollover Fund

If Transferring from one Super Fund to another is selected, you are required to select a rollover fund to appear on the RBS forms. Begin typing the name of the rollover fund and select it from the drop down list below. The rollover fund will need to be added as a Contact before processing the transfer.

Service Period Start Date

Input the Service Period Start Date.

Date of Payment

Input the Date of Payment (date of wind up).

Rollover Amount

Input 100%

Rollover Components

These fields will pre-fill.

Preservation Amounts

These fields will pre-fill.

Contributed Amounts

Input any contribution amounts included in the payment.

After you have entered all information for the transaction, select Post. From the drop down list select Post and Prepare Documents to add the transaction to the Transaction List and prepare the Rollover Benefits StatementLump Sum Prepayment Form and PAYG Payment Summary


Select Download All to download all forms in one PDF or select the download icon next to each form to download individually. 

Alternatively, select Post to add the transaction to the Transaction List and not prepare the above form or select Post & Add Another to add the transaction to the Transaction List, but remain on the Bank Statements screen. 


Complete these steps for each member.

Step 5 -  Create Final period end entries for the fund and produce the annual return


After paying the members out and paying the fund's income tax there should not be any balance remaining in the fund.


Ensure that you produce a Final Tax Return to notify the ATO what date the fund was wound up.


To produce the Final Tax Return:

  1. Input the wind-up date of the fund in Fund | Fund Details



  2. Input an End Date for each member in The Member List. To input the end date, select each member in the Member list and complete the End Date field (input the date as the day before the wind-up date). Select Save and repeat for all members of the fund. 



  3. Go to Compliance | Period Compliance, create entries for one day - the wind-up date. In this case, the period will be 01/01/2014 - 01/01/2014.

     

  4. Now select Create Entries.


     

  5. Update The SMSF Annual Return to include that the fund is wound up during the financial year. 

    From the Main Toolbar navigate to the Compliance menu.

    Select Tax compliance.



    Select SMSF Annual Return. Next, select Section A: Fund Information



  6. Review Question 9 to confirm the wind-up date input in Fund Details has been included. 



  7. Select Save. For lodgement assistance, see Electronic Lodgement.

 Where an SMSF is wound up during the Financial Year you will need to use the prior year's SMSF Annual Return stationery to produce the tax return and lodge manually (paper).

The ATO does not usually release the PDF version of the SMSF Annual Return until June and will allow funds to lodge the return electronically on or after 1 July.

Members still displaying in Section F of SMSF Annual Return


Issue: Members are still showing under Section F of The SMSF Annual Return instead of Section G

Solution: Ensure the Date Left Fund for each member appearing in Section F instead of Section G is the day prior to the Wind Up Date in Fund | Fund Details (step 5 of above instructions).

CMN.ATO.SMSFAR.436632: Account status must be 'Closed' if closing account balance is nil and account has outgoing amounts


  1. Reverse entries;
  2. Input wind up date in Fund Details ;
  3. Insert date left fund for all active member accounts (one day prior to wind up date);
  4. Create entries and validate the return again.