Should I wind up my SMSF?

One of the most difficult questions to answer is:  Should I wind up my SMSF?  With very few exceptions, this question only arises when the balance of the fund drops so low that the fees paid are not economic, and there is little or no likelihood of rebuilding the balance.  For most people, a SMSF provides a degree of flexibility and control that is difficult to obtain from either a retail or industry fund, and this is the main reason that funds continue to flow into SMSF’s.

What level does the balance of the SMSF need to drop to before the decision is made to close the fund and either withdraw the balance or rollover to a industry or retail fund?  A benchmark used within the industry is that your fees should be less than 2.4% of the balance of the fund, so the first step is to establish this percentage.  Add up all the fees paid by the fund during the year (Accountants fees, Auditors fees, Government Levies, Bank Charges (if applicable), ASIC fees (if applicable) Brokerage fees, etc) find what percentage they make up of the current balance of the fund.

In this way, you have established the cost of running the fund.  Now you need to establish the value of running the fund.  Does it provide opportunities that you consider important that could not be achieved any other way?

Does it enable you to retain assets in the most tax effective way?  If the answer to either (or both) of these two questions is “yes”, then you need to try and establish a monetary value for this added benefit and include it in your calculation of the “true” fees you are paying.  This is not easy, and will vary greatly from person to person.

Other reasons do exist for winding up SMSF’s and these may include: changed family circumstances, disenchantment with the responsibility of being a trustee, or even disenchantment with your professional advisor.

Whatever the reason, the final decision should only be made after thoroughly  considering (and discussing) all aspects of this (generally) irreversible decision.

Steve

No comments yet.

Leave a Reply