Bankruptcy in Australia can be convoluted
and difficult to understand. A question we often get asked here over at
Bankruptcy Experts Sunshine Coast is 'what happens to my super if I file for
Bankruptcy'? The reply for most is straightforward, if your super is actually
in a regulated fund or industry fund like Sunsuper or Host Plus then nothing at
all happens; your super is 100 % safe when it involves Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, take into
consideration the growing number of members of Self-Managed Super Funds
("SMSFs") in the last few 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 to Bankruptcy?
Remember Bankruptcy Experts Sunshine Coast
is not implying this short article is the entire story, if you have any
questions feel free to get in touch with us on 1300 795 575. Whether you call
us or another person it does not matter, just please don't walk into bankruptcy
blind when it comes to your SMSF indeed we recommend you look for 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 facing bankruptcy, you
will be categorized 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 must
also be the individual trustees. The job of trustee causes a lot of legal
rules, and if you are in this position I would highly urge you to end up being
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 damaging to a SMSF and as you can imagine the process
of Bankruptcy for a SMSF is rather convoluted.
How long do I have to restructure my SMSF
Fund once I'm bankrupt?
So what develops 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 want to consider your extensive structure
and ensure that it is meeting the basic conditions, involving having a new
trustee that is not experiencing issues with Bankruptcy. The Australian Tax
office will supply you a 6 month 'grace period' to get this done before you
face penalties. And consider, sometimes the best 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
frequently keeping the ATO informed of what is happening. This suggests you
have 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 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 unsure call Bankruptcy Experts Sunshine Coast 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 be their responsibility
to oversee the sale and transfer 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
have to decide if they would like to remain as a single member SMSF, or if they
would like to roll everything into a managed fund. If both members are entering
bankruptcy, then they would 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 at the moment facing this
trouble yourself, or with a partner in a SMSF, please seek financial advice to
make sure you are satisfying the ATO requirements.
A simple solution ...
As I recommended 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 getting proper advice is the best first step. If you want to
discuss your options further, contact us at Bankruptcy Experts Sunshine Coast
or visit our website: www.bankruptcyexpertsSunshineCoast.com.au or just call us
on 1300 795 575.
