Bankruptcy in Australia can be convoluted
and confusing. A question we commonly get asked here at Bankruptcy Experts
Townsville is 'what happens to my super if I file for Bankruptcy'? The answer
for most is straightforward, if your super is simply in a regulated fund or
industry fund like Sunsuper or Host Plus then absolutely nothing happens; your
super is 100 % safe when it involves Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, look into the
developing number of members of Self-Managed Super Funds ("SMSFs")
over the last few years; 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 involves Bankruptcy?
Remember Bankruptcy Experts Townsville is
not proposing this post is the whole story, if you have any questions feel free
to contact us on 1300 795 575. Regardless if you call us or another person it
doesn't matter, just please don't walk into bankruptcy blind when it comes to
your SMSF indeed we advise you look for both legal and financial advice before
proceeding with any of the actions indicated in this article.a
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 taking on bankruptcy,
you will be labeled 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 each of these
members need to also be the individual trustees. The role of trustee causes a
lot of legal rules, and if you are in this position I would highly urge you to
end up being 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 destructive to a SMSF and as you can imagine the
process of Bankruptcy for a SMSF is rather convoluted.
How much time do I have to restructure my
SMSF Fund after I'm bankrupt?
So what comes to pass 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 need to consider your entire structure
and make certain it is meeting the basic conditions, including things like
having a new trustee that is not suffering from issues with Bankruptcy. The
Australian Tax office will offer you a 6 month 'grace period' to get this done
before you face penalties. And consider, sometimes the absolute 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
continuously keeping the ATO informed of what is happening. This suggests you
have to let them know that you have a bankruptcy issue with your current
trustee, that they are being removed as soon as possible know who the new
trustee/director is. The Bankrupt will also have to inform the ATO using the
form NAT 3036 (Found on the ATO website) and they need to also notify ASIC of
their resignation.
Through that 6 month period you will need
to remove the Bankrupt from the SMSF-- including their property and assets.
Remember if you are not sure call Bankruptcy Experts Townsville for some free
advice on 1300 795 575.
What if I have a single member fund?
If you are a single member fund, then you
will have to appoint a new director, and it will then be 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 need to resign and the other member will
clear away the property and halve the proceeds. They would then want to decide
if they wish to remain as a single member SMSF, or if they would like to roll
all of it into a managed fund. If both members are entering bankruptcy, then
they would need to sell all assets immediately and transfer the liquid assets
to the managed fund.
From this you can see how when it comes to Bankruptcy,
even though one single member is facing issues, it can affect the very
existence of an SMSF. If you are right now facing this issue yourself, or with
a partner in a SMSF, please seek financial advice to make certain you are
satisfying the ATO requirements.
A simple solution ...
As I recommended earlier, a basic solution
to your SMSF problem is to put your super back into a normal regulated managed
fund before bankruptcy and save yourself all the frustrations outlined above. Bankruptcy
is never easy, but getting proper advice is the best initial step. If you want
to discuss your options further, call us at Bankruptcy Experts Townsville or
visit our website: www.bankruptcyexpertsTownsville.com.au or just call us on
1300 795 575.