Superannuation is puzzling enough, let alone when you need to worry about Bankruptcy as well. At Bankruptcy Experts Gosford we frequently have people asking us about what will happen to their super, and if you possess a regulated or industry fund (like most superfunds) then your super is secure, and Bankruptcy will have no influence upon your super. However, if you have a Self-Managed Super Fund then you might get some problems because there are various things you can not do whilst bankrupt related to the management of finances.
This is really a growing concern with a number of Australians in the last few years; the ATO tells us it has increased Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what happens to these Superfunds when it boils down to Bankruptcy?
As I recommended previously, a fundamental option to your SMSF concern is to put your super back into a standard regulated managed fund prior to bankruptcy and save yourself all the problems described above.
First and foremost, if you are taking into account Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are going up against bankruptcy, you will be grouped as a ‘disqualified person’. And a disqualified person can not operate as an Individual Trustee. This leads to a problem because generally most of the SMSFs are just 2 individuals, which implies the two of these users must also be the individual trustees. The position of trustee sets a great deal of legal rules, and if you are in this position I would highly advise you to become acquainted with them all– for example the fact that you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can notice how an individual bankruptcy could be quite harmful to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather convoluted.
Irrespective if you phone us or somebody else it does not matter, just please don’t walk into bankruptcy blind when it relates to your SMSF. In reality because Bankruptcy is so complicated with SMSFs we urge you to get both legal and financial recommendations before proceeding with any of the steps pointed out in this post.
So what occurs if one of the members of an SMSF does enter Insolvency?
For starters, the SMSF will need to be reorganized. This means that you will wish to take into consideration your whole structure and ensure it is satisfying the basic conditions, consisting of aspects like having a new trustee that is not coping with problems with Bankruptcy. The Australian Tax office will provide you a 6 month ‘grace period’ to get this completed before you face punishments. And consider, in some cases the most optimal strategy would certainly be to just roll the fund into an industry or corporate fund.
Beyond these large-scale restructuring difficulties, there is a huge amount of paperwork to deal with too, and you have to be constantly keeping the ATO notified of what is occurring. This shows you have to let them know that you have a bankruptcy problem with your current trustee, that they are being removed as quickly as possible and let them know who the new trustee/director is. The Bankrupt will also need to update the ATO using the form NAT 3036 (Found on the ATO website) and they will need to also notify ASIC of their resignation.
In the course of that 6 month period of time you will need to remove the Bankrupt from the SMSF– including their property and assets. Bear in mind if you are uncertain call Bankruptcy Experts Gosford for some complimentary guidance on 1300 795 575.
What if I use a single member fund?
However, if you are a single member fund the Bankruptcy can be a bit different since you will want to appoint a new director (since it can not be you any longer) you are going to need to make a great deal of hard decisions with this so contacting a professional is going to be important. You can easily get in touch with Bankruptcy Experts Gosford for some free guidance on 1300 795 575.
From that you can acknowledge how when it comes to Bankruptcy, despite the fact that one single member is dealing with issues, it can impact the very existence of an SMSF. If you are at this point facing this concern yourself, or with a partner in a SMSF, feel free to seek financial advice to make sure you are fulfilling the ATO demands.
Bankruptcy is certainly never easy, but getting correct advice is the best first step. If you would like to discuss your choices further, contact us at Bankruptcy Experts Gosford or visit our website: www.bankruptcyexpertsgosford.com.au or just call us on 1300 795 575.