Trustees wind up their SMSF for many reasons: the balance has fallen to the point where fees outweigh the benefits, the members have separated, the remaining member no longer wants the responsibility, or a member has died. Whatever the reason, closing a fund is a process, not a single form, and steps done out of order can leave money stranded or tax unpaid. This guide sets out how to wind up an SMSF, following the ATO’s steps.
Step 1: check the trust deed and agree in writing
The deed may set specific requirements for winding up and for how benefits can be paid, including whether assets can be transferred to members instead of sold. All trustees should agree to wind up the fund at a trustee meeting, record the decision in minutes, and sign. Keep a written exit plan with the fund’s records.
Step 2: sell or transfer the assets
Allow enough time to sell assets at a fair price, especially property or unlisted investments. Document each disposal: how and when it was sold, its valuation, the buyer, the date and the amount. Assets can only be transferred to a member in their own name if the member has met a condition of release and the deed permits it. Sales of fund assets can create capital gains tax in the final year.
Step 3: stop any pensions and report them
Pensions must be ended before the fund is wound up, and the commutations reported on a transfer balance account report as soon as possible. Make sure the minimum pension for the final year has been paid, or the fund may lose its tax exemption for that year.
Step 4: pay expenses and tax
Pay final invoices, asset sale costs and any tax owing, including PAYG instalments, PAYG withholding, CGT and GST. The ATO will not close the fund while there is any balance, credit or debit, on its accounts. Leave enough money in the fund to cover the final audit, accounting and the supervisory levy.
Step 5: pay out or roll over member benefits
Work out each member’s entitlement. Members who have met a condition of release, such as retirement after preservation age or reaching 65, can be paid in cash. Everyone else must have their benefits rolled over to another complying fund through SuperStream. Any refund the fund receives later that members cannot access must also be rolled over before the fund’s ABN is cancelled.
Step 6: final audit and final annual return
- Make sure every year has been audited by an approved SMSF auditor, including the final year
- Lodge any outstanding annual returns
- On the final return, answer that the fund was wound up during the year, give the wind-up date and confirm all lodgment and payment obligations are met
- Include the supervisory levy adjustment for wound-up funds
You do not need to write to the ATO separately. Lodging the final return tells the ATO the fund has been wound up. Once it is processed, the ATO confirms in writing that the ABN has been cancelled. A wound-up fund cannot be reactivated.
Step 7: tell everyone and close the bank account last
- Tell employers who were paying contributions into the fund, so they redirect them
- Tell your tax agent, auditor and adviser
- If the corporate trustee existed only for the fund, it can be deregistered with ASIC
- Close the bank account last, after final refunds, rollovers and the ATO’s confirmation. Closing it early can stop refunds being paid
Common mistakes
- Rolling out all the money before the final audit and accounting fees are paid
- Paying cash to a member who has not met a condition of release
- Forgetting the final year’s minimum pension
- Closing the bank account before the final refund arrives
- Not telling an employer, so contributions keep arriving in a fund that is closing
Frequently asked questions
How long does it take to wind up an SMSF?
Usually a few months, depending mostly on how long it takes to sell assets and finalise the last audit and return.
Is there a minimum balance below which I should close my SMSF?
There is no legal minimum. The question is whether the fixed costs of accounting, audit and the levy are reasonable compared with the balance and the benefits you get from managing it yourself.
What happens when a member of a two-member fund dies?
The surviving member must restructure the trustees within six months, often by moving to a corporate trustee, or wind up the fund. Death benefits are paid according to any binding nomination, the deed and the law.
Winding up an SMSF in Melbourne
Kennedy Tax & Business Services handles the final accounts, transfer balance reporting and final annual return for funds being wound up, and arranges the final independent audit. See our SMSF accounting service and SMSF audit checklist, or contact us.
This article is general information only and does not take into account your circumstances. Based on ATO guidance on winding up an SMSF current at October 2026. Speak to a registered tax agent or licensed financial adviser before acting.
