Bankruptcy in Australia can be complicated
and difficult to understand. A question we usually get asked here over at
Bankruptcy Experts Canberra is 'what happens to my super if I file for
Bankruptcy'? The answer for most is easy, if your super is simply in a regulated
fund or industry fund like Sunsuper or Host Plus then very little 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
consideration the evolving number of members of Self-Managed Super Funds
("SMSFs") over 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 Experts Canberra is not
indicating this article is the whole story, if you have any questions feel free
to call 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 in fact we suggest you obtain both legal and financial advice before
proceeding with any of the actions proposed in this article.
What is a Disqualified Person?
First and foremost, if you are thinking
about Bankruptcy, you can not be a part of a SMSF. Why? Because if you are
dealing with bankruptcy, you will be identified as a 'disqualified person'. And
a disqualified person cannot operate as an Individual Trustee. This poses a
problem since usually most of the SMSFs are just 2 people, which means the two
of these members need to also be the individual trustees. The duty of trustee
presents a lot of legal rules, and if you are in this position I would highly
recommend you to be knowledgeable about 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 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 once I'm bankrupt?
So what happens 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 have to consider your over-all structure
and ensure that it is meeting the basic conditions, involving having a new
trustee that is not encountering issues with Bankruptcy. The Australian Tax
office will offer you a 6 month 'grace period' to get this done before you face
penalties. And keep in mind, sometimes the most ideal plan would be to simply
roll the fund into an industry or corporate fund.
Beyond these large scale reorganizing
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
need 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 have to inform the ATO using the
form NAT 3036 (Found on the ATO website) and they must 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 Canberra 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 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
want to decide if they wish 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 will need to sell all assets as soon as possible and
transfer the liquid assets to the managed fund.
From that you can notice how when it comes
to Bankruptcy, even when one single member is dealing with issues, it can
affect the very existence of an SMSF. If you are currently facing this problem
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 simple solution
to your SMSF issue 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 possibilities further, call us at Bankruptcy Experts
Canberra or visit our website: www.bankruptcyexpertsCanberra.com.au or just
call us on 1300 795 575.
