Bankruptcy in Australia can be involved and
difficult to understand. A question we usually get asked here at Fresh Start
Solutions Brisbane is 'what happens to my super if I declare Bankruptcy'? The
answer for most is easy, if your super is normally in a regulated fund or
industry fund like Sunsuper or Host Plus then absolutely nothing 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, look at the
developing number of members of Self-Managed Super Funds ("SMSFs")
lately; the ATO tells us it has increased 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 Fresh Start Solutions Brisbane is
not proposing this short article is the entire story, if you have any questions
feel free to consult with us on 1300 818 575. No matter if you call us or
somebody else it doesn't matter, just please don't walk into bankruptcy blind
when it comes to your SMSF in truth we highly recommend you ask for both legal
and financial advice before proceeding with any of the actions proposed in this
article.
What is a Disqualified Person?
First and foremost, if you are thinking
about 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 since usually most of the SMSFs are just 2 people, which means both of
these members will need to also be the individual trustees. The role of trustee
causes a lot of legal rules, and if you are in this role I would highly urge
you to become familiar with them all-- for example the fact that you can not
'know or suspect' that one of you are bankrupt. So you can see how an
individual bankruptcy can be very destructive to a SMSF and as you can imagine
the process of Bankruptcy for a SMSF is rather convoluted.
How much time do I have to restructure my
SMSF Fund after I'm bankrupt?
So what takes place if one of the members
of an SMSF does enter Bankruptcy?
For starters, the SMSF will have to be
restructured. This means that you will want to consider your complete structure
and ensure that it is meeting the basic conditions, involving having a new
trustee that is not encountering 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 very best 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
constantly keeping the ATO informed of what is happening. This indicates you
need 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 need to 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 sure call Fresh Start Solutions Brisbane for some free
advice on 1300 818 575.
What if I have a single member fund?
If you are a single member fund, then you
will need 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 need to
resign and the other member will clear away the property and halve the
proceeds. They would then want to decide if they would like to remain as a
single member SMSF, or if they want to roll everything into a managed fund. If
both members are entering bankruptcy, then they would definitely need to sell
all assets at once and move the liquid assets to the managed fund.
From that you can see how when it comes to Bankruptcy,
even though one single member is facing issues, it can affect the very
existence of an SMSF. If you are at the moment facing this matter 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 recommended earlier, a basic solution
to your SMSF problem is to put your super back into a normal regulated managed
fund before bankruptcy and save yourself all the headaches outlined above. Bankruptcy
is never easy, but finding proper advice is the best initial step. If you want
to discuss your options further, contact us at Fresh Start Solutions Brisbane
or visit our website: www.freshstartsolutions.com.au/bankruptcy-Brisbane.com.au
or just call us on 1300 818 575.
