Bankruptcy and Superannuation.

Superannuation is puzzling enough, let alone when you need to think about Bankruptcy as well. At Bankruptcy Experts Hobart we often have people talking to us about what can occur to their super, and if you possess a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will likely have no influence upon your super. However, 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 related to the management of finances.

This is actually a growing 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 proposed previously, a fundamental solution to your SMSF concern is to put your super back into a normal regulated managed fund before going bankrupt and save yourself all the issues outlined 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 person can not function as an Individual Trustee. This leads to a complication because usually most of the SMSFs are just 2 individuals, which means the two of these members must also be the individual trustees. The position of trustee sets a bunch of legal rules, and if you are in this position I would strongly advise you to be familiar with them all– as an example the fact that you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can notice how an individual insolvency could be quite damaging to a SMSF and as you can imagine the procedure of Bankruptcy for a SMSF is rather convoluted.

Regardless if you phone us or somebody else it does not matter, just please don’t step into bankruptcy blind when it relates to your SMSF. In fact because Bankruptcy is so complicated with SMSFs we urge you to get both legal and financial recommendations before proceeding with any one of the actions suggested within 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 reorganized. This means that you will certainly want to think about your whole structure and make sure it is meeting the basic rules, incorporating things 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’ in order to get this accomplished before you face penalties. And take into consideration, in some cases the most optimal strategy would be to simply roll the fund into an industry or corporate fund.

More than these large-scale restructuring troubles, there is a great deal of paperwork to take care of too, and you have to be continually keeping the ATO updated of what is happening. This suggests you have 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 Insolvent will likewise need to inform 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 not sure call Bankruptcy Experts Hobart for some free recommendations 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 will be a little bit varied as you will want to designate a new director (because it can not be you from now on) you will need to make a great deal of hard selections with this and so contacting a professional is going to be vital. You can contact Bankruptcy Experts Hobart for some free guidance on 1300 795 575.

From that you can acknowledge how whenever it comes to Bankruptcy, even though one single member is handling issues, it can impact the very existence of an SMSF. If you are at this moment facing this matter yourself, or with a partner in a SMSF, feel free to seek financial advice to make sure you are fulfilling the ATO requirements.

Bankruptcy is certainly never simple, but getting proper guidance is the most effective first step. If you would like to talk about your options further, contact us at Bankruptcy Experts Hobart or visit our website: www.bankruptcyexpertshobart.com.au or just call us on 1300 795 575.

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