How to Wind Up an SMSF: Closing a Self-Managed Super Fund Step by Step
Closing a self-managed super fund takes more than emptying the bank account. Why funds are wound up, how members' benefits are rolled over or paid out, the final audit and final annual return, the supervisory levy, and the mistakes that keep a fund open longer than it should be.
A self-managed super fund doesn't close when the members stop using it. The trustees are responsible for the fund's compliance even if there is no money left in it. To wind up an SMSF – close it, or wind it down, in everyday terms – the trustees have to deal with every member's benefits, sell or transfer every asset, pay the last bills, have a final independent audit and lodge a final SMSF annual return. Only then does the ATO treat the fund as wound up and cancel its ABN.
Members first
Audit, then return
Bank account last
Whether to wind up your fund, and where your super goes next, are your own decisions – or ones to make with a licensed financial adviser. This article explains how the process works.
Why people wind up an SMSF
The ATO lists the common reasons:
- Members retiring and pensions running down. Once the members' benefits have been paid out or rolled over, there is nothing left for the fund to do.
- A member or trustee dying, or losing capacity. In a fund with two individual trustees, if one leaves or dies the options are to appoint another trustee, change to a company trustee, or wind up.
- Disputes between trustees – including after a relationship breakdown, or simply different views on how the fund should be run.
- A trustee no longer having the time, health or capacity to run the fund.
- Costs and performance. The fund's investments are making significant losses, or the fund can no longer cover its running costs.
- Moving overseas. To keep its tax concessions, an SMSF must stay an Australian super fund, which means its central management and control – its strategic decisions – must ordinarily be in Australia. A temporary absence of up to 2 years is generally fine, but if central management and control moves permanently overseas, the fund fails the test and is taxed at the highest marginal rate. The ATO's guidance for trustees moving overseas is to roll their benefits into an Australian regulated fund and wind up the SMSF.
Two warnings from the ATO before you start. Once an SMSF is wound up it can't be reactivated. And winding up a fund to get at super before you are allowed to is illegal early access, with serious penalties.
Step 1: Check the trust deed and agree as trustees
The trust deed may set out how the fund is to be wound up, so read it first, together with the fund's exit plan if it has one.
All trustees (or all directors of the company trustee) then meet and agree to wind up. Record the decision in minutes or a trustee resolution, and get every member's agreement in writing – the auditor will check both, along with any wind-up requirements in the deed.
Step 2: Deal with each member's benefits
Every member's balance must leave the fund. There are two ways, and which is open to a member depends on whether they have met a condition of release (such as retiring after preservation age, or turning 65):
- Rollover to another complying fund. Any member who has not met a condition of release must have their benefits rolled over to another complying super fund, such as an APRA-regulated retail or industry fund. Rollovers are made electronically through SuperStream, so you need the receiving fund's details, including its ABN and unique superannuation identifier (USI), and the member's account details there.
- Payment as a lump sum. A member who has met a condition of release can choose to be paid out or to roll over. The trustees must confirm the member is entitled before releasing anything.
Pensions. If the fund is paying a pension, it has to be stopped (commuted) before the fund is wound up, and the trustees need to check whether they must report the commutation to the ATO in a transfer balance account report. An actuarial certificate may also be needed for the final year if a pension was paid.
Death benefits. If a member has died, their benefit is generally paid to a dependant or other eligible beneficiary, following the trust deed and any valid binding death benefit nomination. The deed must be followed even where it differs from the member's will.
Step 3: Sell or transfer the assets
The fund must end up with no assets. For each asset the trustees can either:
- sell it and pay the cash out or roll it over, keeping a record of the buyer, the date and the price. The sale must be at arm's length – on commercial terms and at market value – and a sale to a member, a relative or another related party gets close scrutiny from the auditor; or
- transfer it in specie – move the asset itself, such as listed shares, out of the fund. An asset transferred to a member counts as a lump sum payment, so the member must have met a condition of release. An in-specie rollover to another fund only happens if the receiving fund agrees to take the asset.
Every sale or transfer must be at market value, and a transfer of a collectable to a related party needs a written valuation from a qualified independent valuer.
Capital gains tax. Selling or transferring an asset is a CGT event for the fund. A complying fund gets a one-third discount on gains on assets it has held for at least 12 months. If the fund is paying a retirement-phase pension, some or all of the gain may be exempt as exempt current pension income, depending on how the fund claims the exemption – which is one reason the timing of pension commutations and asset sales matters.
While the assets are being sold, the trustees also:
- collect the last of the fund's income – dividends, interest, rent, distributions
- settle any limited recourse borrowing arrangement (LRBA) – the loan has to be repaid along with the fund's other debts
- pay final expenses, and close investment and platform accounts
- tell employers and anyone else who pays into the fund that it is closing
Keep enough cash in the fund to pay what falls due after the final return is lodged – the accountant's and auditor's fees and any tax. A final rollover should only be made once all the liabilities are paid and money owed to the fund has come in.
Step 4: Final accounts and the final audit
The fund needs final financial statements and member statements for its last income year, up to the date it stopped holding assets.
Then an approved (ASIC-registered) SMSF auditor must audit that final year – and any earlier year still outstanding – before the final annual return can be lodged. The auditor checks, among other things, that:
- the trust deed's wind-up requirements were met and all members agreed in writing
- assets were sold or transferred at market value
- benefits went only to members who had met a condition of release, or to complying funds
If the bank account stays open after the audit for a final tax payment or refund, the auditor will ask the trustees for written representations about those later transactions. Problems found in the final audit are reported to the ATO like any other year's.
The auditor must be independent of the fund. A firm that prepares a fund's accounts generally can't also audit them, so the accountant and the auditor for the final year are different people.
Step 5: Lodge the final SMSF annual return
The final return is the fund's last SMSF annual return. It answers Yes to the question Was the fund wound up during the income year? and gives the date it was wound up – the date the fund no longer held any assets. You don't have to write to the ATO separately: lodging the final return notifies the ATO that the fund is winding up. Before lodging, all outstanding earlier returns must be lodged, all debts paid and all member benefits paid out or rolled over.
The supervisory levy. Each SMSF annual return collects the levy in advance for the following year. For the 2026 return, which covers 2025–26, that is $259 for 2026–27. A fund wound up during the year doesn't owe the next year's levy, so the final return includes an adjustment (label M) that cancels it out: in the 2026 return, a fund wound up during 2025–26 enters $259 at label M and pays no levy for 2026–27. The levy for the final year itself was already paid with the previous year's return. A fund that is set up and wound up in the same year pays only the levy for that one year. Check the instructions for the year of your final return, as the amounts can change.
The ABN. Don't cancel it yourself. The ATO cancels the fund's ABN once it has processed the final return and all outstanding obligations are met.
Step 6: Close the bank account and the company trustee
Close the fund's bank account last – only after:
- all final liabilities are paid
- any refund from the ATO has been received
- all rollovers have been completed through SuperStream
- the ATO has confirmed the fund has been wound up
A company trustee. If the company was set up only to act as the fund's trustee, ASIC needs to be told so it can be deregistered. If the company has another use, the directors may choose to keep it.
Step 7: Keep the records
Winding up doesn't end the record-keeping. The fund's accounting records, operating statements and statements of financial position must be kept for at least 5 years, and minutes of trustee meetings and decisions for at least 10 years. Each trustee's trustee declaration must be kept for 10 years, or for as long as they remain a trustee if that is longer. The ATO tells auditors to check that trustees know to keep all the fund's records, including the wind-up records, for at least 10 years after the final return is lodged – the simplest course is to keep everything for that long.
Common mistakes
- Closing the bank account too early. The ATO's refund or a last bill then has nowhere to go, and the fund can't be finalised.
- Paying a benefit without a condition of release. Paying a member who isn't entitled is illegal early access – penalties and disqualification for the trustees, and tax for the member.
- Forgetting the final audit, or an earlier year's audit that is still outstanding. The final return can't be lodged without them.
- Leaving a small balance behind – a late dividend, interest, a refund or an unsold small holding. Until the fund holds no assets, it isn't wound up.
- Not ending a pension properly or not reporting the commutation.
- Not keeping cash for the final fees and tax, so there is no money left in the fund to pay them.
Questions people ask
How do I close an SMSF?
Agree as trustees and record it in minutes, roll over or pay out every member's benefits, sell or transfer all assets and pay the last expenses, have the final year audited by an approved SMSF auditor, then lodge a final SMSF annual return marked as wound up. Close the bank account only after the ATO confirms the wind-up.
Do I have to tell the ATO separately that my SMSF is wound up?
No. Lodging the final SMSF annual return, with the wind-up question answered Yes and the wind-up date filled in, notifies the ATO. The ATO then cancels the fund's ABN once all outstanding obligations are met.
Does a wound-up SMSF still pay the supervisory levy?
Not for the year after it is wound up. The final annual return includes an adjustment that cancels the next year's levy. The levy for the final year was already paid with the previous year's return.
Can I take my super out as cash when the fund closes?
Only if you have met a condition of release, such as retirement. If you haven't, your benefits must be rolled over to another complying super fund.
Does the final year need an audit?
Yes. An approved SMSF auditor must audit the final year, and any earlier year that is still outstanding, before the final annual return can be lodged.
What happens to a company trustee when the fund is wound up?
If the company was set up only to act as the fund's trustee, ASIC needs to be told so it can be deregistered. If the company has another purpose, it can be kept.
Can a wound-up SMSF be reopened?
No. Once a fund is wound up it can't be reactivated. If you want an SMSF again later, you set up a new one.
How we can help
We prepare the final financial statements and member statements, the minutes, and the final SMSF annual return with the levy adjustment, and we work through the rollovers, asset transfers and the order of steps with you. The final audit has to be done by an independent auditor: if we prepare your fund's accounts, another auditor audits them and we deal with them directly. If someone else prepares the accounts and you only need the final audit, our independent SMSF audit service can do it.
Fees for a wind-up are quoted per fund, as the work depends on what the fund holds and how many members it has. Ask us for a quote.
Still deciding between an SMSF and a large fund? See comparing SMSFs with other super funds. Whether to wind up, and where to roll your super over to, are decisions for you or a licensed financial adviser – we don't hold an Australian Financial Services Licence, but we are happy to work alongside your adviser.