Bankruptcy Australia can be complicated
and perplexing. A question we often get asked here over at Bankruptcy Advice
Sunshine Coast is 'what happens to my super if I apply for Bankruptcy'? The
reply for most is straightforward, if your super is usually in a regulated fund
or industry fund like Sunsuper or Host Plus then nothing 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
account the growing number of members of Self-Managed Super Funds
("SMSFs") over the last few years; the ATO tells us it has grown
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 Advice Sunshine Coast
is not proposing this short article is the whole story, if you have any
questions feel free to consult with us on 1300 879 867. Whether you call us or
someone else it does not matter, just please don't walk into bankruptcy blind
when it comes to your SMSF in fact we highly recommend you obtain both legal
and financial advice before proceeding with any of the actions proposed ina
this article.
What is a Disqualified Person?
First and foremost, if you are taking into
account Bankruptcy, you can not be a part of a SMSF. Why? Because if you are
coping with bankruptcy, you will be labeled 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 have to also be the individual trustees. The role of trustee
sets a lot of legal rules, and if you are in this position I would highly
encourage you to be aware of them all-- including 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 rather harmful to a SMSF and as you can assume the
process of Bankruptcy for a SMSF is rather convoluted.
How much time do I have to restructure my
SMSF Fund after I'm bankrupt?
So what takes effect if one of the members
of an SMSF does enter Bankruptcy?
For starters, the SMSF will have to be
reorganized. This means that you will want to consider your over-all structure
and make certain it is meeting the basic conditions, including having a new
trustee that is not experiencing 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
frequently keeping the ATO informed of what is happening. This indicates you
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 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.
During 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 uncertain call Bankruptcy Advice Sunshine Coast
for some free advice on 1300 879 867.
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 become 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 take away the property and halve the proceeds. They
would then need to decide if they wish to remain as a single member SMSF, or if
they want to roll it all into a managed fund. If both members are entering
bankruptcy, then they would need to sell all assets immediately and move the
liquid assets to the managed fund.
From this you can notice how when it comes
to Bankruptcy, even if one single member is dealing with issues, it can affect
the very existence of an SMSF. If you are right now facing this trouble
yourself, or with a partner in a SMSF, please seek financial advice to make
sure you are meeting the ATO requirements.
A simple solution ...
As I recommended earlier, a straightforward
solution to your SMSF issue is to put your super back into a normal regulated
managed fund before bankruptcy and save yourself all the frustrations 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 Advice Sunshine Coast or visit our website:
www.bankruptcy-advice.com.au/SunshineCoast.au or just give us a call on 1300
879 867.
