Bankruptcy in Australia can be convoluted
and difficult to understand. A question we usually get asked here at Bankruptcy
Experts Rockhampton is 'what happens to my super if I file for Bankruptcy'? The
answer for most is simple, if your super is probably 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
account the expanding 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 involves Bankruptcy?
Remember Bankruptcy Experts Rockhampton is
not proposing this short article is the complete story, if you have any
questions feel free to get in touch with us on 1300 795 575. Whether or not 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 encourage you obtain
both legal and financial advice before proceeding with any of the actions
recommended 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
confronting 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 need to also be the individual trustees. The job of
trustee poses a lot of legal rules, and if you are in this position I would
highly encourage you to become 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 damaging to a SMSF and as you
can imagine 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 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 complete structure
and ensure it is meeting the basic conditions, including having a new trustee
that is not having issues with Bankruptcy. The Australian Tax office will
provide you a 6 month 'grace period' to get this done before you face
penalties. And bear in mind, sometimes the very 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 indicates you
will need 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 have 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 not sure call Bankruptcy Experts Rockhampton 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 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 take away the property and halve the proceeds. They would
then want to decide if they choose 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 promptly 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 facing issues, it can affect the very
existence of an SMSF. If you are currently facing this trouble yourself, or
with a partner in a SMSF, please seek financial advice to make certain you are
meeting the ATO requirements.
A simple solution ...
As I recommended earlier, a basic 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 headaches outlined
above. Bankruptcy is never easy, but receiving proper advice is the best 1st
step. If you want to discuss your options further, call us at Bankruptcy
Experts Rockhampton or visit our website:
www.bankruptcyexpertsRockhampton.com.au or just give us a call on 1300 795 575.
