Top 6 tips when winding up your SMSF

SMSFs come to an end like all other great things. But unlike members of public funds, people with SMSFs can’t just take all their money out and call it a day. They need to take specific steps to formally wind up their fund and there are smart ways to do it.

Tip #1 – Watch the rules for pensions

Often, SMSFs that are wound up are paying pensions to one or more of the members. Winding up the fund will mean terminating (commuting) the pension(s). There’s a special rule when a pension finishes : a pro rata payment has to be paid first. For example, if a pension is being commuted on (say) 1 January (half way through a financial year), around half the normal minimum pension payment must be made before this happens.

If the fund is being wound up by selling all the assets and the member(s) will just transfer the cash to their personal bank accounts, this isn’t so critical – simply treat some of the cash as a final pension payment.

But sometimes SMSF wind ups are achieved by transferring all the existing assets to a member personally (an in specie transfer) or moving the remaining balance to a new super fund (a rollover). Neither of these can “count” as a pension payment. Some cash would need to be paid to the member separately to meet the rules.

Tip #2 – Don’t rush

Again – this tip is relevant for SMSFs with pensions. Specifically, funds with both pension and accumulation accounts that are still quite large but are being moved out of the SMSF.

It’s often possible to get a better tax result by spreading the withdrawal process over a few years.

For example, Clay has $800,000 in his fund - $600,000 in a pension account and $200,000 in an accumulation account. It’s May 2026 and he’s considering winding up his fund. His fund has cash of around $150,000 and the rest is invested. Selling investments to take the money out of his SMSF will involve realising capital gains. While most of his fund (75%) is in pension phase (so 75% of these capital gains will be exempt from tax), it might still cost a bit if the trustee sold everything at once. Clay might be able to reduce his tax quite a bit if he does this in two steps:

• Withdraw a lot of his accumulation account by withdrawing most of the cash “now” (May 2026), and
• Wait until July 2026 (ie, the following financial year) to sell the assets and transfer the remainder out of his SMSF. The important thing here is that in the year in which he is realising capital gains in his SMSF, virtually all of the fund is in a pension account. That will make a (good) difference to the tax paid by his SMSF.

Tip #3 – Don’t forget final taxes (or refunds) and costs

Often SMSF wind ups take time even if there are no pensions involved because even the simplest wind ups look something like this:

• the assets are sold / transferred to another fund (or out of super entirely),
• the fund lodges a final tax return, and
• a tax refund arrives.

You’d definitely want to make sure there was still an open bank account ready to receive that tax refund!

It’s also worth noting that there might be final costs (accounting fees, audit, ATO levies) which don’t arise until most of the money has already been taken out of the fund. It’s important to allow for those when deciding how much to “leave behind” in the fund’s bank account.

Tip #4 – Watch “SuperStream”

SuperStream is the name given to the rules around how money and data has to be transferred between super funds.

If your SMSF is being wound up and the money will be transferred to a public super fund, it’s not as simple as filling in an application form and transferring the money. Your SMSF has to send a special type of digital message to the receiving fund telling it the money is coming (usually your accountant would do this for you). Then, exactly the right amount has to be paid in a single transfer with the right payment reference. It’s not possible, for example, to make the transfer in lots of smaller amounts to fit within your bank’s daily transfer limit – you’ll need to get that raised beforehand so you can make the transfer in one go.

Tip #5 - Act quickly once final return is lodged

When you tell the ATO you’ve wound up your fund (by lodging your final tax return), within a very short period, they’ll cancel your fund’s ABN (Australian Business Number). Once that happens, other super funds won’t recognise your fund – which is a real problem if you’re still trying to transfer some of your super to a public super fund. Make sure you get as much as possible of this work done (transfers made, final costs paid etc) before the final return is lodged. And then follow your accountant’s instructions quickly for any final transfers.

Tip #6 - Don’t forget to tell your employer

If you’re still working when you wind up your SMSF, you might be receiving regular contributions from your employer into your SMSF. These will need to go to your new fund. Make sure you get that change in place before starting the wind up process. The last thing you’d want is for your employer to continue paying contributions to your (now defunct) SMSF and have extra hassles getting the money moved into your new fund.

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