SMSF wind-ups continue to slow
Less SMSF funds have been wound up in the 2022 financial year, according to ATO data.
The figures show that while wind-ups were more subdued during each quarter from September 2021 until March 2022, there was a 60 per cent reduction in June 2022 compared to the previous June.
Additionally, in the first two quarters of the 2023 financial year, the numbers have continued to fall away.
Shelley Banton, head of education at ASF Audits, said there seems to be no anecdotal evidence to explain the drop off in SMSF wind-ups.
“While it’s a healthy result for the SMSF industry, we can only guess as to why the number has actually reduced.”
“It could be the poor performance of APRA funds being a factor.
“You can ask the questions ‘Did it all get too hard when SuperStream was introduced in October 2021 and all the teething problems kicked in March 2022? Do the reduced numbers reflect a SuperStream hangover?’
“Because once you’ve wound up the fund and lodge the final return, there’s no going back. The fund can’t be reactivated or re-established, and it ceases to be a legal entity under the SIS tax and trusts law.”
According to the data from the ATO from February 2023 approximately 15,400 SMSFs wound up in 2020–21, compared to an annual average of 18,100 for the five years to 2020–21.
Of the SMSFs that wound up in 2020–21 the average assets held in the year before wind-up was $502,000, up from $374,000 for funds that wound up in 2016–17, and $476,000 for funds that wound up in 2019–20.
The median assets held in the year before wind-up was $320,000, up from $200,000 for funds that wound up in 2016–17 and $281,000 for funds that wound up in 2019–20.
Thirty-six per cent of those reported assets of $200,000 or less in the year before their wind-up, down from 50 per cent of funds that wound up in 2016–17, and 40 per cent of funds that wound up in 2019–20.
Around 56 per cent were in accumulation phase and 44 per cent were in retirement phase and the average period from establishment to wind-up was 12.8 years.
“There are many different reasons for winding up a fund but regardless of what they are, it’s important that all members agree to close the fund,” said Ms Banton.
“Some of the reasons for winding up include that it can be no longer cost-effective to operate the fund, there’s no assets left, the trustees might be moving overseas indefinitely.
“The members just may be sick of running the fund and have no more appetite to do that. The fund could also have multiple breaches, and the ATO was issued a notice of non-compliance in which case they have no choice but to wind the fund up. And lastly, but not least, there could have been a relationship breakdown or a divorce or a separation.”