Bankruptcy in Australia can be complicated
and confusing. A question we usually get asked here at Bankruptcy Advice
Adelaide is 'what happens to my super if I declare Bankruptcy'? The solution
for most is simple, if your super is usually 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
account the evolving number of members of Self-Managed Super Funds
("SMSFs") in the last few years; the ATO tells us it has increased
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 Advice Adelaide is not
implying this short article is the whole story, if you have any questions feel
free to consult with us on 1300 879 867. No matter if you call us or someone
else it does not matter, just please don't walk into bankruptcy blind when it
comes to your SMSF actually we suggest 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 taking into
account Bankruptcy, you can not be a part of a SMSF. Why? Because if you are
dealing with 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 the two of these members need to also be the individual trustees. The
position of trustee presents a lot of legal rules, and if you are in this role
I would highly recommend you to get 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 very destructive to a SMSF and
as you can assume the process of Bankruptcy for a SMSF is rather convoluted.
How much time do I have so as to
restructure my SMSF Fund after I'm bankrupt?
So what takes effect 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 complete 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
give you a 6 month 'grace period' to get this done before you face penalties.
And keep in mind, sometimes the most effective 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 indicates you
need 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 must 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 not sure call Bankruptcy Advice Adelaide for some
free advice on 1300 879 867.
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 end up being their duty
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 clear away the property and halve the proceeds. They would then
need to decide if they would like to remain as a single member SMSF, or if they
intend to roll all of it into a managed fund. If both members are entering
bankruptcy, then they would definitely need to sell all assets at once 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 dealing with issues, it can affect the very
existence of an SMSF. If you are actually facing this trouble 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 suggested earlier, a straightforward
solution to your SMSF situation 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 options further, call us at
Bankruptcy Advice Adelaide or visit our website:
www.bankruptcy-advice.com.au/Adelaide.com.au or just give us a call on 1300 879
867.
