Managing a self-managed super fund (SMSF) can be rewarding, but there comes a point where the complexity and effort involved may no longer justify the benefits. In cases like yours—where a single member, aging trustee, and shifting financial needs are in play—it’s worth considering whether an industry fund might be a better alternative.
Key Considerations in Winding Up an SMSF
1. Trustee Responsibilities and Decision Fatigue
As the director of your mother’s SMSF, you are actively involved in its administration, investment decisions, and compliance obligations. Since you’ve mentioned discomfort in managing her investments, an SMSF may no longer be the right fit. An industry fund removes this burden by offering professional investment management without requiring trustee oversight.
2. Investment Performance and Cash Accumulation
It’s also concerning that a significant amount of cash is accumulating outside the SMSF. This suggests:
- The minimum pension withdrawals are exceeding her spending needs, leading to a growing personal cash balance that could be better invested.
- Some managed funds in the SMSF are underperforming, meaning her capital might not be working as effectively as it could in a diversified, professionally managed portfolio.
Industry funds offer a range of investment options, including balanced, conservative, and high-growth strategies. A switch could ensure her retirement savings continue to grow while reducing the need for hands-on decision-making.
3. Costs and Compliance Burden
SMSFs come with annual costs for accounting, auditing, compliance, and regulatory fees. If the fund’s balance declines or remains stagnant, these costs could outweigh the benefits of control and flexibility.
In an industry fund:
Lower fees apply compared to an SMSF (especially for balances under $1M).
No annual audits or compliance work is required.
No need for ongoing investment decision-making or regulatory updates.
Given that your mother is 77 years old, it’s also important to consider that an SMSF cannot continue without a trustee. If you are unwilling to take over full control when she is no longer able to participate, moving her super to an industry fund sooner rather than later makes sense.
4. Transitioning to an Industry Fund: What’s Involved?
If you decide to wind up the SMSF, the process includes:
- Liquidating the fund’s investments (while considering CGT implications).
- Rolling over the remaining balance into an industry super fund.
- Ensuring all tax returns, audits, and reporting obligations are met before formally closing the fund.
This can be a complex process, and seeking professional guidance ensures a smooth transition while minimizing tax and compliance risks.
Is It Time to Wind Up the SMSF?
If managing the fund has become stressful, expensive, or no longer aligns with your mother’s needs, transitioning to an industry super fund may be the best option. A professionally managed fund can provide lower fees, diversified investments, and reduced administrative burdens, allowing both you and your mother to focus on enjoying retirement rather than managing compliance.
How Boa & Co. Can Help
At Boa & Co. Chartered Accountants, we specialize in SMSF administration and strategic superannuation advice. Whether you need help assessing the best option or navigating the wind-up process, our team can guide you every step of the way. Call us at 1300 952 286, email [email protected], or visit www.boanco.com.au to discuss the best path forward.