Superannuation is perplexing enough, let alone when you need to think about Bankruptcy as well. At Bankruptcy Experts Fremantle we frequently have people talking to us about what can occur 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 might find some problems because there are various things you can not do while bankrupt surrounding the management of finances.
This is really a growing concern with a lot of Australians in the last few years; the ATO informs 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?
As I proposed earlier, a basic solution to your SMSF issue is to put your super back into a typical regulated managed fund prior to insolvency and save yourself all the complications described above.
Firstly, if you are taking into account 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 complication because usually most of the SMSFs are just 2 people, which implies both of these participants 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 advise you to become familiar with them all– for instance the fact that you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can notice how an individual bankruptcy can be rather harmful to a SMSF and as you can imagine the procedure of Bankruptcy for a SMSF is rather complicated.
Irrespective if you contact us or somebody else it does not matter, just please don’t walk into bankruptcy blind when it concerns your SMSF. In reality because Bankruptcy is so complex with SMSFs we urge you to get both legal and financial guidance before proceeding with any one of the actions suggested within this short article.
So what takes place if one of the members of an SMSF does enter Bankruptcy?
For starters, the SMSF will need to be reorganized. This means that you will certainly wish to take into consideration your entire structure and make certain it is meeting the basic conditions, including points like maintaining a new trustee that is not dealing with problems with Personal 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 optimal strategy would certainly be to just roll the fund into an industry or corporate fund.
Beyond these large-scale restructuring problems, there is a great deal of paperwork to handle too, and you need to be constantly keeping the ATO updated of what is occurring. This indicates you have to let them know that you have a bankruptcy problem with your current trustee, that they are being removed as soon 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 need to also notify ASIC of their resignation.
Throughout that 6 month period of time you will have to remove the Bankrupt from the SMSF– including their property and assets. Keep in mind if you are uncertain call Bankruptcy Experts Fremantle for some free suggestions on 1300 795 575.
What if I use a single member fund?
However, if you are a single member fund the Bankruptcy will certainly be a little bit diverse because you will be required to appoint a new director (simply because it can not be you anymore) you are going to need to make a lot of hard selections with this therefore getting in touch with a specialist is going to be necessary. You can contact Bankruptcy Experts Fremantle for some free assistance on 1300 795 575.
From that you can discover how when it involves Bankruptcy, despite the fact that one single member is managing troubles, 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, please seek financial advice to make sure you are meeting the ATO demands.
Bankruptcy is never easy, but getting correct guidance is the best first step. If you would like to talk about your options further, contact us at Bankruptcy Experts Fremantle or visit our website: www.bankruptcyexpertsfremantle.com.au or just call us on 1300 795 575.