Superannuation is perplexing enough, let alone when you should think about Bankruptcy too. At Bankruptcy Experts Dandenong we frequently have people talking to us about what may occur to their super, and if you possess a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will have no impact upon your super. However, if you have a Self-Managed Super Fund then you could get some concerns because there are a number of things you can not do while bankrupt related to the management of finances.

This is really an increasing 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 suggested earlier, a fundamental option to your SMSF issue is to put your super back into a standard regulated managed fund prior to insolvency and save yourself all the problems outlined above.

First and foremost, if you are taking into consideration Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are going up against personal bankruptcy, 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 usually most of the SMSFs are just 2 people, which implies the two of these participants must also be the individual trustees. The position of trustee sets a great deal of legal rules, and if you are in this position I would highly advise you to be familiar with them all– for example the fact that you can not ‘know or suspect’ that one of you are insolvent. So you can notice how an individual insolvency could be quite harmful to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather intricate.

Irrespective if you call us or somebody else it does not matter, just please do not step into bankruptcy blind when it concerns your SMSF. In fact because Bankruptcy is so complicated with SMSFs we urge you to get both legal and financial assistance before proceeding with any one of the actions suggested in this article.

So what takes place 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 want to think about your whole structure and make certain it is satisfying the basic conditions, incorporating points like having a new trustee that is not coping with issues with Personal bankruptcy. The Australian Tax office will offer you a 6 month ‘grace period’ in order to get this done before you face punishments. And consider, in some cases the most ideal strategy would be to just roll the fund into an industry or corporate fund.

More than these large-scale restructuring difficulties, there is a lot of paperwork to deal with too, and you have to be continuously keeping the ATO notified of what is happening. This suggests you need 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 Bankrupt will additionally need to update the ATO using the form NAT 3036 (Found on the ATO website) and they will need to also notify ASIC of their resignation.

In the course of that 6 month period you will have to remove the Bankrupt from the SMSF– including their property and assets. Remember if you are uncertain call Bankruptcy Experts Dandenong for some free 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 can be a bit diverse since you will need to designate a new director (simply because it can not be you any longer) you are going to need to make a great deal of hard decisions with this and so speaking to a professional is going to be vital. You can easily contact Bankruptcy Experts Dandenong for some free guidance on 1300 795 575.

From that you can notice how when it involves Bankruptcy, even though one single member is handling problems, 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 get financial advice to make sure you are fulfilling the ATO demands.

Bankruptcy is never uncomplicated, but finding proper suggestions is the most effective initial step. If you would like to talk about your approaches further, contact us at Bankruptcy Experts Dandenong or visit our website: www.bankruptcyexpertsdandenong.com.au or just call us on 1300 795 575.

Bankruptcy and Superannuation.