Bankruptcy in Australia can be complicated
and difficult to understand. A question we commonly get asked here at
Bankruptcy Experts Alice Springs is 'what happens to my super if I apply for
Bankruptcy'? The answer for most is easy, if your super is normally in a regulated
fund or industry fund like Sunsuper or Host Plus then nothing at all happens;
your super is 100 % safe when it involves Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, take into
account the growing number of members of Self-Managed Super Funds
("SMSFs") lately; the ATO tells us it has expanded Australia-wide
from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds
when it comes to Bankruptcy?
Remember Bankruptcy Experts Alice Springs
is not suggesting this article is the complete story, if you have any questions
feel free to call us on 1300 795 575. Whether you call us or someone else it
doesn't matter, just please don't walk into bankruptcy blind when it comes to
your SMSF indeed we highly recommend you obtain both legal and financial advice
before proceeding with any of the actions indicated in this article.
What is a Disqualified Person?
First and foremost, if you are considering Bankruptcy,
you can not be a part of a SMSF. Why? Because if you are being confronted by
bankruptcy, you will be classified as a 'disqualified person'. And a
disqualified individual cannot operate as an Individual Trustee. This poses a
problem due to the fact that usually most of the SMSFs are just 2 people, which
means both of these members have to also be the individual trustees. The
position of trustee causes a lot of legal rules, and if you are in this
position I would highly urge you to become aware of them all-- for example the
fact that you can not 'know or suspect' that one of you are bankrupt. So you
can notice how an individual bankruptcy can be rather damaging to a SMSF and as
you can assume the process of Bankruptcy for a SMSF is rather convoluted.
How long do I have to restructure my SMSF
Fund after I'm bankrupt?
So what happens if one of the members of an
SMSF does enter Bankruptcy?
For starters, the SMSF will have to be
reorganized. This means that you will need to consider your over-all structure
and ensure it is meeting the basic conditions, including having a new trustee
that is not experiencing issues with Bankruptcy. The Australian Tax office will
provide you a 6 month 'grace period' to get this done before you face
penalties. And keep in mind, sometimes the best plan would be to simply roll
the fund into an industry or corporate fund.
Beyond these large scale restructuring
issues, there is a lot of paperwork to deal with too, and you need to be
constantly keeping the ATO informed of what is happening. This suggests you
need to let them know that you have a bankruptcy problem with your current
trustee, that they are being removed as soon as possible know who the new
trustee/director is. The Bankrupt will also need to inform the ATO using the
form NAT 3036 (Found on the ATO website) and they must also notify ASIC of
their resignation.
Over 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 Experts Alice Springs for some
free advice on 1300 795 575.
What if I use a single member fund?
If you are a single member fund, then you
will need to appoint a new director, and it will then become their duty to
oversee the sale and relocation of assets into a managed fund. If there are two
or more members, than the bankrupt member will have to resign and the other
member will take away the property and halve the proceeds. They would then have
to decide if they choose to remain as a single member SMSF, or if they need to
roll it all into a managed fund. If both members are entering bankruptcy, then
they would definitely need to sell all assets as soon as possible and transfer
the liquid assets to the managed fund.
From this you can notice how when it comes
to Bankruptcy, even though one single member is dealing with issues, it can
affect the very existence of an SMSF. If you are right now facing this matter
yourself, or with a partner in a SMSF, please seek financial advice to make
sure you are satisfying the ATO requirements.
A simple solution ...
As I suggested earlier, a basic solution to
your SMSF issue is to put your super back into a normal regulated managed fund
prior to bankruptcy and save yourself all the problems outlined above. Bankruptcy
is never easy, but receiving proper advice is the best initial step. If you
want to discuss your possibilities further, contact us at Bankruptcy Experts
Alice Springs or visit our website: www.bankruptcyexpertsAliceSprings.com.au or
just give us a call on 1300 795 575.
