Bankruptcy in Australia can be complicated
and difficult to understand. A question we often get asked here at Bankruptcy
Experts Adelaide is 'what happens to my super if I apply for Bankruptcy'? The
answer for most is straightforward, if your super is usually in a regulated
fund or industry fund like Sunsuper or Host Plus then absolutely nothing
happens; your super is 100 % safe when it comes to Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, take into
account the evolving number of members of Self-Managed Super Funds
("SMSFs") in 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 comes down to Bankruptcy?
Remember Bankruptcy Experts Adelaide is not
suggesting this short article is the entire story, if you have any questions
feel free to consult with us on 1300 795 575. Regardless if you call us or
somebody else it does not matter, just please don't walk into bankruptcy blind
when it comes to your SMSF in fact we encourage you get 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 grouped as a 'disqualified person'.
And a disqualified individual cannot operate as an Individual Trustee. This
poses a problem because usually 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 lot of legal rules, and if you are in this position
I would highly urge you to be familiar with 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 harmful 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 takes place 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 want to consider your whole structure
and make sure it is meeting the basic conditions, including things like having
a new trustee that is not dealing with 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 most ideal 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 indicates you
have 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 need to also notify ASIC of
their resignation.
In the course of 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 Adelaide 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 end up being their
obligation to oversee the sale and transfer 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 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 want to roll all of it 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 that 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 at this point facing this
matter yourself, or with a partner in a SMSF, please seek financial advice to
make sure you are meeting 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
before bankruptcy and save yourself all the problems outlined above. Bankruptcy
is never easy, but finding proper advice is the best first step. If you want to
discuss your options further, give us a call at Bankruptcy Experts Adelaide or
visit our website: www.bankruptcyexpertsAdelaide.com.au or just call us on 1300
795 575.
