Bankruptcy in Australia can be involved and
confusing. A question we usually get asked here over at Bankruptcy Experts
Geelong is 'what happens to my super if I file for Bankruptcy'? The solution
for most is easy, if your super is actually in a regulated fund or industry
fund like Sunsuper or Host Plus then very little happens; your super is 100 %
safe when it comes down to Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, take into
consideration the evolving number of members of Self-Managed Super Funds
("SMSFs") over the last few years; the ATO tells us it has grown
Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to
these Superfunds when it concerns Bankruptcy?
Remember Bankruptcy Experts Geelong is not
proposing this post is the whole story, if you have any questions feel free to
consult with us on 1300 795 575. No matter 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 in truth we suggest you find 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 taking into
account Bankruptcy, you can not be a part of a SMSF. Why? Because if you are
going up against bankruptcy, you will be categorized as a 'disqualified
person'. And a disqualified individual cannot operate as an Individual Trustee.
This poses a problem since usually 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 lot of legal rules, and if you are in this role I would
highly urge you to end up being familiar with them all-- for example the fact
that you can not 'know or suspect' that one of you are bankrupt. So you can see
how an individual bankruptcy can be rather harmful to a SMSF and as you can
assume the process of Bankruptcy for a SMSF is rather convoluted.
How long do I have so as to restructure my
SMSF Fund once I'm bankrupt?
So what comes about if one of the members
of an SMSF does enter Bankruptcy?
For starters, the SMSF will need to be
reorganized. This means that you will need to consider your extensive structure
and make sure it is meeting the basic conditions, involving having a new
trustee that is not having issues with Bankruptcy. The Australian Tax office
will provide you a 6 month 'grace period' to get this done before you face
penalties. And bear in mind, 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
frequently keeping the ATO informed of what is happening. This indicates you
ought to let them know that you have a bankruptcy complication 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 will need to 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 not exactly sure call Bankruptcy Experts Geelong 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 be their responsibility
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
need to decide if they choose to remain as a single member SMSF, or if they
intend to roll everything into a managed fund. If both members are entering
bankruptcy, then they would need to sell all assets at once and transfer the
liquid assets to the managed fund.
From this you can notice how when it comes
to Bankruptcy, even if one single member is running into issues, it can affect
the very existence of an SMSF. If you are right now facing this trouble
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 proposed earlier, a simple solution to
your SMSF problem is to put your super back into a normal regulated managed
fund before bankruptcy and save yourself all the problems outlined above. Bankruptcy
is never easy, but getting proper advice is the best initial step. If you want
to discuss your possibilities further, give us a call at Bankruptcy Experts
Geelong or visit our website: www.bankruptcyexpertsGeelong.com.au or just call
us on 1300 795 575.
