Bankruptcy in Australia can be involved and
difficult to understand. A question we usually get asked here at Bankruptcy
Experts Gladstone is 'what happens to my super if I declare Bankruptcy'? The
solution for most is simple, if your super is actually 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 evolving number of members of Self-Managed Super Funds
("SMSFs") in recent 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 Experts Gladstone is
not indicating this post is the complete story, if you have any questions feel
free to get in touch with us on 1300 795 575. Whether you call us or somebody
else it does not matter, just please don't walk into bankruptcy blind when it
comes to your SMSF in truth we advise you find both legal and financial advice
before proceeding with any of the actions suggested in 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
facing bankruptcy, you will be categorized 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
job of trustee presents a lot of legal rules, and if you are in this position I
would highly encourage you to get knowledgeable about them all-- for example
the fact that you can not 'know or suspect' that one of you are bankrupt. So
you can notice how an individual bankruptcy can be quite detrimental 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 transpires if one of the members of
an SMSF does enter Bankruptcy?
For starters, the SMSF will need to be
restructured. This means that you will have to consider your complete structure
and ensure it is meeting the basic conditions, including having a new trustee
that is not experiencing issues with Bankruptcy. The Australian Tax office will
offer you a 6 month 'grace period' to get this done before you face penalties.
And keep in mind, 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
continuously keeping the ATO informed of what is happening. This indicates you
ought 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 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 not exactly sure call Bankruptcy Experts Gladstone 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 have to appoint a new director, and it will then end up being their
responsibility to oversee the sale and relocation 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 have to decide if they want 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 will need to sell all assets immediately and
move the liquid assets to the managed fund.
From that you can see how when it comes to Bankruptcy,
even when one single member is running into issues, it can affect the very
existence of an SMSF. If you are at the moment facing this concern yourself, or
with a partner in a SMSF, please seek financial advice to make sure you are
satisfying the ATO requirements.
A simple solution ...
As I suggested 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 frustrations outlined
above. Bankruptcy is never easy, but finding proper advice is the best 1st
step. If you want to discuss your possibilities further, call us at Bankruptcy
Experts Gladstone or visit our website: www.bankruptcyexpertsGladstone.com.au
or just give us a call on 1300 795 575.
