Superannuation is perplexing enough, not to mention when you need to worry about Bankruptcy too. At Bankruptcy Experts Northern Rovers we often have people asking us about what will take place 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 influence upon your super. However, if you have a Self-Managed Super Fund then you may get some problems because there are certain things you can not do whilst insolvent surrounding the management of finances.
This is actually a growing concern with a number 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 recommended earlier, a basic option to your SMSF issue is to put your super back into a normal regulated managed fund before insolvency and save yourself all the issues outlined above.
First and foremost, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are confronting bankruptcy, you will be grouped as a ‘disqualified person’. And a disqualified person can not function as an Individual Trustee. This poses a challenge because usually most of the SMSFs are just 2 people, which means both of these members 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 advise 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 observe how an individual insolvency could be rather harmful to a SMSF and as you can envision the process of Bankruptcy for a SMSF is rather convoluted.
Regardless if you call us or somebody else it does not matter, just please don’t walk into insolvency 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 decisions indicated within this post.
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 certainly want to consider your entire structure and make certain it is complying with the basic requirements, incorporating aspects like having a new trustee that is not dealing with issues with Insolvency. The Australian Tax office will offer you a 6 month ‘grace period’ in order to get this accomplished before you face penalties. And consider, in some cases the most ideal strategy would certainly be to simply roll the fund into an industry or corporate fund.
More than these large-scale restructuring complications, there is a huge amount of paperwork to take care of too, and you need to be continuously keeping the ATO notified of what is happening. This shows you need to let them know that you have a bankruptcy problem with your current trustee, that they are being removed as quickly as possible and let them 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 duration you will have to remove the Bankrupt from the SMSF– including their property and assets. Remember if you are not sure call Bankruptcy Experts Northern Rovers for some free guidance on 1300 795 575.
What happens if I use a single member fund?
However, if you are a single member fund the Bankruptcy will certainly be a little bit different since you will want to designate a new director (since it can not be you anymore) you will need to make a lot of hard choices with this therefore consulting with a professional is going to be vital. You can easily phone Bankruptcy Experts Northern Rovers for some free assistance on 1300 795 575.
From that you can notice how when it comes to Bankruptcy, even though one single member is handling concerns, it can impact the very existence of an SMSF. If you are at this point facing this issue yourself, or with a partner in a SMSF, please seek financial advice to make sure you are meeting the ATO needs.
Bankruptcy is certainly never easy, but finding appropriate advice is the very best initial step. If you wish to discuss your approaches further, contact us at Bankruptcy Experts Northern Rovers or visit our website: www.bankruptcyexpertsnorthernrivers.com.au or just call us on 1300 795 575.