CMN.ATO.SMSFAR.436349: Total Australian and Overseas assets and member entitlements must be greater than zero unless the fund has been wound up

Validation Error 

This validation error occurs when the SMSF has no assets, or one or more members have a nil or negative account balance.

The ATO will not accept an annual return for an SMSF in these circumstances, unless the return is for the year in which the fund is being wound up.

How to resolve this Validation Error 

There are four ways to resolve this validation error. The correct option depends on the status of the fund:

• Close the negative or nil member account
• Allocate additional funds into the member’s account
• Windi up the SMSF
• Not lodging the tax return. 

Closing the negative or nil member account

To close the negative members' account:

1. From the Member Dashboard, locate the member account with a zero balance.  

2. Select the Member Account, then select View Details, then select Edit and under Account Details, input an Account End Date when the member's balance should be zero.
   

   If the member's account has a negative balance, you may need to use the Member Allocation Worksheet to get the member's balance to zero. 

   The balance must be zero before you can apply an end date to the account.

Allocate additional funds into the member’s account

To allocate more money into the Member's account

1. From the Period Compliance screen, select Reverse Entries. 
2. Using the Member Allocation Worksheet, to transfer funds from a member with a positive balance to the member with a negative balance.
   
   The balance must be positive or zero before the return can be lodged.

Winding up the SMSF

If the SMSF has reached the end of its lifecycle and has no remaining assets, the fund must be wound up.

For step-by-step instructions in Simple Fund 360, Wind Up Wizard.

Not lodging the tax return

According to the ATO, 

"An SMSF is not legally established until the fund has assets set aside for the benefit of members. If your fund had no assets in the first year it was registered, you won’t need to lodge a return for that year."

https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-administration-and-reporting/lodge-smsf-annual-returns 

If this scenario applies to your fund, refer to the ATO guidance for the next steps.