When an SMSF is wound up there are a number of regulatory obligations that need to be met. The ATO sets out such obligations in the Guide to winding up a SMSF.
Notably, it is important to close the SMSF’s bank account last, as closing it too early can create problems especially if the SMSF housed life insurance cover.
As an insurer, when we are instructed to cancel an SMSF-owned insurance policy, say due to a decision to wind down the client’s SMSF, our starting point is to refund any ‘prepaid’ premiums back to the SMSF. Naturally, complexities emerge when we process a refund and attempt to deposit the prepaid premiums into a recently foreclosed SMSF bank account.
It is therefore best practice to hold off from closing the SMSF bank account until such time that all expected final liabilities and refunds have been settled. This extends to any refund associated with the prepayment of insurance premiums held over the lives of SMSF members.