Bankruptcy and Superannuation.

Superannuation is perplexing enough, let alone when you should stress over Bankruptcy as well. At Bankruptcy Advice we frequently have individuals talking to us about what may happen to their super, and if you possess a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will have no impact upon your super. However, if you have a Self-Managed Super Fund then you may discover some problems because there are various things you can not do when bankrupt surrounding the management of finances.

This is really an increasing concern with a number of Australians in the last few years; the ATO tells us it has increased Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds when it comes down to Bankruptcy?

As I proposed earlier, a fundamental option to your SMSF concern is to put your super back into a normal regulated managed fund before insolvency and save yourself all the complications outlined above.

Firstly, if you are taking into consideration Bankruptcy, you can not be a part of a SMSF. Why? Because if you are confronting personal bankruptcy, you will be grouped as a ‘disqualified person’. And a disqualified person can not operate as an Individual Trustee. This poses a problem because typically most of the SMSFs are just 2 individuals, which implies both of these users must also be the individual trustees. The position of trustee sets a bunch of legal guidelines, and if you are in this position I would strongly urge you to be familiar with them all– as an example the fact that you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can observe how an individual bankruptcy could be rather harmful to a SMSF and as you can picture the process of Bankruptcy for a SMSF is somewhat complicated.

Irrespective if you phone us or somebody else it does not matter, just please don’t walk into bankruptcy blind when it concerns your SMSF. In fact because Bankruptcy is so complicated with SMSFs we encourage you to get both legal and financial guidance before proceeding with any of the actions indicated within this post.

So what occurs if one of the members of an SMSF does enter Bankruptcy?

For starters, the SMSF will want to be restructured. This means that you will want to consider your entire structure and make sure it is complying with the basic rules, consisting of points like maintaining a new trustee that is not dealing with problems with Insolvency. The Australian Tax office will offer you a 6 month ‘grace period’ to get this accomplished before you face penalties. And take into consideration, often the most ideal plan would be to simply roll the fund into an industry or corporate fund.

Beyond these large-scale restructuring concerns, there is a lot of paperwork to handle too, and you have to be continuously keeping the ATO informed of what is occurring. This suggests you have to let them know that you have a bankruptcy issue with your current trustee, that they are being removed as quickly as possible and let them know who the new trustee/director is. The Insolvent will also need to inform the ATO using the form NAT 3036 (Found on the ATO website) and they will need to also notify ASIC of their resignation.

During that 6 month period you will need to remove the Bankrupt from the SMSF– including their property and assets. Remember if you are uncertain call Bankruptcy Advice for some free recommendations on 1300 879 867.

What if I use a single member fund?

On the other hand, if you are a single member fund the Bankruptcy will certainly be a bit diverse as you will be required to appoint a new director (because it can not be you anymore) you will need to make a great deal of challenging choices with this so consulting with a specialist is going to be important. You can phone Bankruptcy Advice for some free advice on 1300 879 867.

From that you can discover how whenever it comes to Bankruptcy, even though one single member is managing concerns, it can impact the very existence of an SMSF. If you are at this point facing this issue yourself, or with a partner in a SMSF, feel free to get financial advice to make sure you are satisfying the ATO demands.

Bankruptcy is never simple, but finding proper recommendations is the very best first step. If you would like to discuss your approaches further, give us a call at Bankruptcy Advice or visit our website: or just call us on 1300 879 867.