Bankruptcy in Australia can be involved and
confusing. A question we commonly get asked here at Bankruptcy Experts
Newcastle is 'what happens to my super if I declare Bankruptcy'? The answer for
most is simple, if your super is actually 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, think about the
developing number of members of Self-Managed Super Funds ("SMSFs")
lately; the ATO tells us it has expanded 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 Newcastle is
not indicating this short article is the whole story, if you have any questions
feel free to call us on 1300 795 575. No matter if you call us or another
person it does not 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 considering Bankruptcy,
you can not be a part of a SMSF. Why? Because if you are coping with bankruptcy,
you will be identified 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 each of these members
will need to 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 encourage you to
be aware of 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 quite damaging to a SMSF and as you can imagine the process of Bankruptcy
for a SMSF is rather convoluted.
How long do I have so as to restructure my
SMSF Fund after I'm bankrupt?
So what comes to pass 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 overall structure
and make certain it is meeting the basic conditions, involving having 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 done before you
face penalties. And consider, sometimes the most effective 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 means you have
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 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 unsure call Bankruptcy Experts Newcastle 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 have to appoint a new director, and it will then end up being 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 have 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 want to roll all of it into a managed fund. If both
members are entering bankruptcy, then they would definitely need to sell all
assets immediately and transfer the liquid assets to the managed fund.
From this 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 already facing this problem
yourself, or with a partner in a SMSF, please seek financial advice to make
sure you are fulfilling the ATO requirements.
A simple solution ...
As I proposed earlier, a straightforward
solution to your SMSF problem 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 1st
step. If you want to discuss your possibilities further, give us a call at
Bankruptcy Experts Newcastle or visit our website:
www.bankruptcyexpertsNewcastle.com.au or just give us a call on 1300 795 575.
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