Superannuation is puzzling enough, let alone when you need to worry about Bankruptcy also. At Bankruptcy Experts Townsville we frequently have people questioning us about what can happen to their super, and if you have a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will likely have no effect upon your super. Nonetheless, if you have a Self-Managed Super Fund then you may get some concerns because there are various things you can not do when bankrupt related to the management of finances.

This is actually a growing concern with a number of Australians in the last few years; the ATO tells us it has developed 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?

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As I proposed previously, a fundamental 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.

First and foremost, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Because if you are going up against personal bankruptcy, you will be grouped as a ‘disqualified person’. And a disqualified individual can not function as an Individual Trustee. This poses a problem because usually most of the SMSFs are just 2 individuals, which implies the two of these members must also be the individual trustees. The position of trustee sets a lot of legal guidelines, and if you are in this position I would highly urge you to become acquainted with them all– for example because you can not ‘know or suspect’ that one of you are bankrupt. So you can observe how an individual bankruptcy can be rather damaging to a SMSF and as you can imagine the procedure of Bankruptcy for a SMSF is rather complicated.

Regardless if you call us or somebody else it does not matter, just please don’t walk into insolvency blind when it concerns your SMSF. In fact because Bankruptcy is so complicated with SMSFs we encourage you to get both legal and financial advice before proceeding with any of the decisions indicated 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 certainly wish to take into consideration your whole structure and make sure it is meeting the basic terms, incorporating things like having a new trustee that is not dealing with problems with Bankruptcy. The Australian Tax office will offer you a 6 month ‘grace period’ to get this done before you face penalties. And take into consideration, sometimes the most optimal plan would be to simply roll the fund into an industry or corporate fund.

Beyond these large-scale restructuring troubles, there is a lot of paperwork to cope with too, and you need to be continuously keeping the ATO informed of what is taking place. This shows you have to let them know that you have a bankruptcy issue with your current trustee, that they are being eliminated as soon as possible and let them know who the new trustee/director is. The Insolvent will likewise need to update the ATO using the form NAT 3036 (Found on the ATO website) and they have to also notify ASIC of their resignation.

In the course of that 6 month period of time you will have to remove the Bankrupt from the SMSF– including their property and assets. Bear in mind if you are uncertain call Bankruptcy Experts Townsville for some complimentary suggestions on 1300 795 575.

What if I use a single member fund?

On the other hand, if you are a single member fund the Bankruptcy will certainly be a bit different as you will want to designate a new director (because it can not be you any longer) you are going to need to make a lot of hard choices with this so consulting with a specialist is going to be vital. You can phone Bankruptcy Experts Townsville for some free guidance on 1300 795 575.

From that you can discover how whenever it involves Bankruptcy, despite the fact that one single member is taking care of problems, it can impact the very existence of an SMSF. If you are at this moment facing this matter yourself, or with a partner in a SMSF, please get financial advice to make sure you are fulfilling the ATO needs.

Bankruptcy is never easy, but getting correct suggestions is the very best first step. If you wish to go over your options further, give us a call at Bankruptcy Experts Townsville or visit our website: or just call us on 1300 795 575.