Bankruptcy and Superannuation.

Superannuation is confusing enough, let alone when you should think about Bankruptcy too. At Bankruptcy Experts Geelong we often have individuals asking us about what may occur to their super, and if you have a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will have no effect upon your super. Nonetheless, if you have a Self-Managed Super Fund then you might get some concerns because there are certain things you can not do when insolvent 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 grown Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what occurs to these Superfunds when it boils down to Bankruptcy?


As I proposed previously, a basic option to your SMSF problem is to put your super back into a standard regulated managed fund before bankruptcy 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 confronting insolvency, you will be grouped as a ‘disqualified person’. And a disqualified person can not operate as an Individual Trustee. This leads to a complication because generally most of the SMSFs are just 2 individuals, which means both of these users must also be the individual trustees. The position of trustee sets a bunch of legal guidelines, and if you are in this position I would strongly 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 insolvency can be rather damaging to a SMSF and as you can imagine the procedure of Bankruptcy for a SMSF is rather convoluted.

Regardless if you contact us or somebody else it does not matter, just please do not step into insolvency blind when it concerns your SMSF. In fact because Bankruptcy is so complicated with SMSFs we urge you to get both legal and financial guidance before proceeding with any of the steps indicated in this article.

So what occurs if one of the members of an SMSF does enter Bankruptcy?

For starters, the SMSF will want to be reorganized. This means that you will want to consider your entire structure and make certain it is meeting the basic rules, incorporating points like maintaining a new trustee that is not dealing with problems with Insolvency. The Australian Tax office will provide you a 6 month ‘grace period’ to get this accomplished before you face punishments. And take into consideration, often the most ideal strategy would be to just roll the fund into an industry or corporate fund.

More than these large-scale restructuring problems, there is a huge amount of paperwork to deal with too, and you have to be continually keeping the ATO updated of what is occurring. This shows you have to let them know that you have a bankruptcy issue with your current trustee, that they are being eliminated as quickly as possible and let them know who the new trustee/director is. The Insolvent will likewise have to inform the ATO using the form NAT 3036 (Found on the ATO website) and they need 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. Just remember if you are uncertain call Bankruptcy Experts Geelong for some free guidance on 1300 795 575.

What happens 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 diverse because you will need to appoint a new director (as it can not be you any longer) you are going to need to make a great deal of challenging decisions with this so getting in touch with a professional is going to be necessary. You can contact Bankruptcy Experts Geelong for some free advice on 1300 795 575.

From that you can notice how whenever it comes to Bankruptcy, although one single member is handling issues, it can affect the very existence of an SMSF. If you are at this point facing this issue yourself, or with a partner in a SMSF, feel free to seek financial advice to make sure you are satisfying the ATO requirements.

Bankruptcy is certainly never simple, but finding proper recommendations is the best initial step. If you want to discuss your options further, contact us at Bankruptcy Experts Geelong or visit our website: or just call us on 1300 795 575.

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