Bankruptcy and Superannuation.
Superannuation is perplexing enough, not to mention when you need to think about Bankruptcy as well. At Bankruptcy Experts Wollongong 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 secure, and Bankruptcy will likely have no impact upon your super. Nonetheless, if you have a Self-Managed Super Fund then you may discover some problems because there are certain things you can not do while 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 occurs to these Superfunds when it comes down to Bankruptcy?
As I recommended previously, a fundamental option to your SMSF problem is to put your super back into a standard regulated managed fund before going bankrupt and save yourself all the problems described above.
Firstly, 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 individual can not function as an Individual Trustee. This leads to a complication because usually most of the SMSFs are just 2 people, which means both of these participants must also be the individual trustees. The position of trustee sets a great deal of legal guidelines, and if you are in this position 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 insolvent. Therefore, you can notice how an individual bankruptcy could be somewhat harmful to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is somewhat complicated.
Irrespective if you contact us or somebody else it does not matter, just please don’t step into bankruptcy blind when it concerns your SMSF. In fact because Bankruptcy is so complex with SMSFs we encourage you to get both legal and financial recommendations before proceeding with any of the decisions pointed out within this article.
So what takes place if one of the members of an SMSF does enter Insolvency?
For starters, the SMSF will need to be restructured. This means that you will certainly want to consider your whole structure and ensure it is meeting the basic terms, incorporating things like maintaining a new trustee that is not coping with problems with Insolvency. The Australian Tax office will offer you a 6 month ‘grace period’ to get this done before you face penalties. And take into consideration, 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 difficulties, there is a great deal of paperwork to deal with too, and you have to be continuously keeping the ATO notified of what is happening. This shows you have to let them know that you have a bankruptcy issue with your current trustee, that they are being removed as quickly as possible and let them know who the new trustee/director is. The Insolvent will likewise need to update 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. Remember if you are not sure call Bankruptcy Experts Wollongong for some complimentary advice on 1300 795 575.
What if I use a single member fund?
However, if you are a single member fund the Bankruptcy will certainly be a bit different as you will need to designate a new director (since it can not be you any longer) you are going to need to make a lot of tough decisions with this and so contacting a professional is going to be essential. You can easily contact Bankruptcy Experts Wollongong for some free assistance on 1300 795 575.
From that you can discover how when it involves Bankruptcy, although one single member is dealing with 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, feel free to get financial advice to make sure you are satisfying the ATO requirements.
Bankruptcy is certainly never simple, but finding proper recommendations is the very best initial step. If you wish to go over your options further, contact us at Bankruptcy Experts Wollongong or visit our website: www.bankruptcyexpertswollongong.com.au or just call us on 1300 795 575.