Bankruptcy in Australia can be convoluted
and difficult to understand. A question we commonly get asked here at
Bankruptcy Experts Coffs Harbour is 'what happens to my super if I declare
Bankruptcy'? The reply for most is easy, if your super is normally in a regulated
fund or industry fund like Sunsuper or Host Plus then absolutely nothing
happens; your super is 100 % safe when it comes down to Bankruptcy.
What if I have a Self Managed Super Fund?
This is a growing concern, think about the
growing number of members of Self-Managed Super Funds ("SMSFs")
lately; 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 Experts Coffs Harbour
is not indicating this short article is the entire story, if you have any
questions feel free to call us on 1300 795 575. Whether you call us or somebody
else it doesn't matter, just please don't walk into bankruptcy blind when it
comes to your SMSF in truth we suggest you ask for 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 considering Bankruptcy,
you can not be a part of a SMSF. Why? Because if you are dealing with
bankruptcy, you will be labeled as a 'disqualified person'. And a disqualified
person cannot operate as an Individual Trustee. This poses a problem due to the
fact that usually most of the SMSFs are just 2 people, which means both of
these members will need to also be the individual trustees. The position of
trustee sets a lot of legal rules, and if you are in this position I would
highly encourage 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 see how
an individual bankruptcy can be rather destructive to a SMSF and as you can
imagine the process of Bankruptcy for a SMSF is rather convoluted.
How long do I have so as to restructure my
SMSF Fund after I'm bankrupt?
So what happens 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 need to consider your whole structure and
ensure it is meeting the basic conditions, including things like having a new
trustee that is not suffering from issues with Bankruptcy. The Australian Tax
office will supply you a 6 month 'grace period' to get this done before you
face penalties. And keep in mind, sometimes the best plan would be to simply
roll the fund into an industry or corporate fund.
Beyond these large scale restructuring
issues, there is a lot of paperwork to deal with too, and you need to be
constantly keeping the ATO informed of what is happening. This means you will
need to let them know that you have a bankruptcy problem 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 must also notify ASIC of
their resignation.
During 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 Coffs Harbour 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 duty
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 remove the property and halve the proceeds. They would then have to
decide if they wish to remain as a single member SMSF, or if they need to roll
it all into a managed fund. If both members are entering bankruptcy, then they
will need to sell all assets right away and transfer the liquid assets to the
managed fund.
From that you can notice how when it comes
to Bankruptcy, even though one single member is running into issues, it can
affect the very existence of an SMSF. If you are actually facing this problem
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 straightforward
solution to your SMSF problem is to put your super back into a normal regulated
managed fund before bankruptcy and save yourself all the headaches outlined
above. Bankruptcy is never easy, but getting proper advice is the best 1st
step. If you want to discuss your options further, call us at Bankruptcy
Experts Coffs Harbour or visit our website:
www.bankruptcyexpertsCoffsHarbour.com.au or just call us on 1300 795 575.
