Bankruptcy in Australia can be involved and
confusing. A question we commonly get asked here at Bankruptcy Experts
Bundaberg is 'what happens to my super if I declare Bankruptcy'? The answer for
most is straightforward, if your super is probably in a regulated fund or
industry fund like Sunsuper or Host Plus then nothing at all 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, look into the
evolving number of members of Self-Managed Super Funds ("SMSFs") in
recent years; 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 comes
down to Bankruptcy?
Remember Bankruptcy Experts Bundaberg is
not indicating this post is the entire story, if you have any questions feel
free to consult with us on 1300 795 575. Whether or not 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 encourage you find both legal and financial
advice before proceeding with any of the actions suggested 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 being confronted by
bankruptcy, you will be categorized as a 'disqualified person'. And a
disqualified person 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 have to also be the individual trustees. The job of
trustee presents a lot of legal rules, and if you are in this position I would
highly recommend you to become familiar with them all-- including 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 damaging to a SMSF and as you can
assume the process of Bankruptcy for a SMSF is rather convoluted.
How long do I have so as to restructure my
SMSF Fund once I'm bankrupt?
So what takes place if one of the members
of an SMSF does enter Bankruptcy?
For starters, the SMSF will have to be
restructured. This means that you will want to consider your whole structure
and make sure it is meeting the basic conditions, including 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 bear in mind, 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 suggests you
will need to let them know that you have a bankruptcy concern 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 uncertain call Bankruptcy Experts Bundaberg 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 need to appoint a new director, and it will then end up being their
obligation to oversee the sale and relocation 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 everything into a managed fund. If both members are
entering bankruptcy, then they would definitely need to sell all assets right
away and move the liquid assets to the managed fund.
From that you can see how when it comes to Bankruptcy,
even when one single member is facing issues, it can affect the very existence
of an SMSF. If you are at the moment facing this problem yourself, or with a
partner in a SMSF, please seek financial advice to make certain you are
fulfilling the ATO requirements.
A simple solution ...
As I proposed earlier, a simple 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 receiving proper advice is the best first step. If you want
to discuss your possibilities further, contact us at Bankruptcy Experts
Bundaberg or visit our website: www.bankruptcyexpertsBundaberg.com.au or just
give us a call on 1300 795 575.
