Ms Scott gave an example of a couple, Sky and Chase, who have been married for 15 years with two children and an SMSF.

She explained that both parties have fairly significant balances, and there are quite a few assets that need to be dealt with within the SMSF.

“The first thing we need to do is to look at the trust deed to see what guidance there is in terms of liquidating the fund,” she said.

“There will usually be a clause within the deed that explains that and what documentation needs to be in place in order to start the process.”

She continued that the accountant or adviser will need to go through that deed to see what is required in terms of winding up the SMSF.

“In my experience, most deeds require a minute stating whether all members are required to participate,” she said.

“The best-case scenario would be to have all involved, particularly in divorces.”

She added that each trustee will have different requirements and noted that it is important that the minute includes these. Ms Scott also underlined the importance of ensuring that each party agrees to any steps instituted in the wind-up process.

“It is also a good idea to include in wind-up minute details on how the benefits are going to be paid, including whether there’s a superannuation split or any in-species rollovers to the new funds, as well as what assets need to be sold down and why.”

She said that the next step in the process of winding up an SMSF in the case of a family breakdown is paying out the balances.

“This really depends on the age of the member, what their requirements are, what they want to do with their balance,” she said.

“Some members might want to roll over a specific asset to another fund; other members might want to have you liquidate the assets in the fund and then pay it over as a cash flow, particularly if they’re moving to a retail fund.”

If a member wants to do an in-specie lump sum, it needs to meet the conditions of release which should also be detailed in the minute, she said.

“When there’s a divorce in place, it’s really important that you document all of the decisions that have been made,” Ms Scott said.

“In the minute, you might find it appropriate to include how the income was allocated between the members.”

Ms Scott added that often if a member is looking to wind up an SMSF, it is because they do not want to deal with the compliance burden of running a self-managed fund.

“If that’s the case, then you would need to make sure that it’s a cash rollover,” she said.

The next step in the wind-up process is to look at liquidating the SMSF’s assets.

“This is something you’re going to be sitting down and doing with your client. You’re going to have a chat with them and see what they want to do,” she said.

With in-specie rollovers, it is important to keep in mind that section 66 of the Superannuation Industry (Supervision) Act will place restrictions on some assets.

“This means that if an SMSF is being created for the member to roll out, you need to make sure that whatever you’re rolling over is allowed to be purchased,” she said.

“If you’ve got listed shares, it’s pretty easy to sell those, but any unlisted assets might be a bit more difficult, and that might be when you’re looking at using either an in-species rollover or sale to a related party or a lump-sum payment.”

Once the balances have been rolled over and most of the funds are out of the SMSF, an audit can be organised. In this phase, the auditor will be looking for specific documentation to be able to lodge a final tax return.

“This can sometimes be a tricky step in the process, particularly depending on what time of the year you’re looking at lodging,” she said.

She warned that it could take up to two years to wind up an SMSF unless it has access to an adequate cash flow.

“Once all the liabilities are paid, bank accounts can be closed,” she said.