Bankruptcy and Superannuation.

Superannuation is confusing enough, not to mention when you have to worry about Bankruptcy too. At Bankruptcy Experts Sunshine Coast we often have individuals talking to us about what will occur 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. Nonetheless, if you possess a Self-Managed Super Fund then you may find some problems because there are a number of things you can not do while insolvent surrounding the management of finances.

This is actually a growing concern with a number of Australians in the last few years; the ATO informs us it has grown 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?

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As I recommended previously, a fundamental solution to your SMSF issue is to put your super back into a standard regulated managed fund prior to personal bankruptcy and save yourself all the issues described above.

First and foremost, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Because if you are confronting insolvency, you will be grouped as a ‘disqualified person’. And a disqualified person can not operate as an Individual Trustee. This leads to a problem because generally most of the SMSFs are just 2 people, which means the two of these members 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 become acquainted with them all– as an example because you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can observe how an individual insolvency could be somewhat harmful to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is somewhat complicated.

Regardless if you call us or somebody else it does not matter, just please do not walk into insolvency blind when it concerns your SMSF. In fact because Bankruptcy is so complex with SMSFs we urge you to get both legal and financial assistance before proceeding with any one of the decisions suggested within this short article.

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

For starters, the SMSF will need to be reorganized. This means that you will wish to consider your whole structure and ensure it is complying with the basic terms, incorporating aspects like maintaining a new trustee that is not dealing with issues with Bankruptcy. The Australian Tax office will provide you a 6 month ‘grace period’ to get this accomplished before you face penalties. And consider, often the most optimal strategy would certainly be to just roll the fund into an industry or corporate fund.

More than these large-scale restructuring issues, there is a great deal of paperwork to handle too, and you have to be constantly keeping the ATO notified of what is occurring. This shows you have to let them know that you have a bankruptcy issue with your current trustee, that they are being eliminated as quickly as possible and let them know who the new trustee/director is. The Insolvent will also need to update 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 duration you will need to remove the Bankrupt from the SMSF– including their property and assets. Keep in mind if you are not sure call Bankruptcy Experts Sunshine Coast for some free suggestions on 1300 795 575.

What happens if I use a single member fund?

However, if you are a single member fund the Bankruptcy will certainly be a bit diverse since you will need to designate a new director (as it can not be you any longer) you are going to need to make a lot of difficult choices with this and so contacting a specialist is going to be vital. You can easily call Bankruptcy Experts Sunshine Coast for some free advice on 1300 795 575.

From that you can acknowledge how whenever it involves Bankruptcy, although one single member is managing troubles, it can have an effect on the very existence of an SMSF. If you are at this moment facing this issue yourself, or with a partner in a SMSF, feel free to seek financial advice to make sure you are satisfying the ATO requirements.

Bankruptcy is certainly never simple, but getting correct guidance is the very best first step. If you want to go over your choices further, contact us at Bankruptcy Experts Sunshine Coast or visit our website: www.bankruptcyexpertssunshinecoast.com.au or just call us on 1300 795 575.

Charles Bosse

Director of Fresh Start Solutions and specialises in helping people free themselves from overwhelming debt. Whether it's Bankruptcy, Liquidation, Insolvency Advice or simply General Debt Advice.

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