March 3, 20173

Bankruptcy and Superannuation.

Posted by:Charles Bosse onMarch 3, 2017

Superannuation is perplexing enough, let alone when you should worry about Bankruptcy also. At Bankruptcy Experts we often have a lot of people questioning us about what may take place to their super, and if you have a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will have no impact upon your super. Having said that, if you possess a Self-Managed Super Fund then you may discover some troubles because there are certain 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 developed Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what occurs to these Superfunds when it comes down to Bankruptcy?

As I recommended previously, a basic option to your SMSF concern is to put your super back into a standard regulated managed fund before personal bankruptcy and save yourself all the troubles described above.

First and foremost, if you are thinking about Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are confronting personal bankruptcy, you will be grouped as a ‘disqualified person’. And a disqualified person can not function as an Individual Trustee. This poses a problem because typically most of the SMSFs are just 2 people, which means both of these members must also be the individual trustees. The position of trustee sets a bunch of legal rules, and if you are in this position I would highly urge you to be aware of them all– for instance because you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can notice how an individual bankruptcy could be somewhat damaging to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather intricate.

Irrespective if you phone us or somebody else it does not matter, just please do not step into bankruptcy blind when it relates to 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 short article.

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

For starters, the SMSF will need to be restructured. This means that you will certainly wish to take into consideration your whole structure and make certain it is satisfying the basic rules, incorporating points like having a new trustee that is not coping with issues with Bankruptcy. The Australian Tax office will provide you a 6 month ‘grace period’ in order to get this completed before you face punishments. And take into consideration, often the most optimal strategy would be to simply roll the fund into an industry or corporate fund.

Beyond these large-scale restructuring troubles, there is a huge amount of paperwork to take care of too, and you have to be continually keeping the ATO updated of what is happening. This shows you need 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 Bankrupt will also need to update the ATO using the form NAT 3036 (Found on the ATO website) and they need to also notify ASIC of their resignation.

In the course of that 6 month time you will need to remove the Bankrupt from the SMSF– including their property and assets. Bear in mind if you are not sure call Bankruptcy Experts for some free recommendations on 1300 818 575.

What happens if I use a single member fund?

On the other hand, if you are a single member fund the Bankruptcy will be a little bit different because you will be required to designate a new director (because it can not be you any longer) you will need to make a lot of challenging choices with this so consulting with a specialist is going to be important. You can easily phone Bankruptcy Experts for some free advice on 1300 818 575.

From that you can acknowledge how when it comes to Bankruptcy, despite the fact that one single member is handling concerns, it can influence the very existence of an SMSF. If you are at this point facing this concern yourself, or with a partner in a SMSF, please get financial advice to make sure you are satisfying the ATO requirements.

Bankruptcy is never uncomplicated, but getting proper advice is the very best initial step. If you would like to go over your approaches further, give us a call at Bankruptcy Experts or visit our website: or just call us on 1300 818 575.


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