September 16, 2016Comments Closed

Bankruptcy and Superannuation

Posted by:admin onSeptember 16, 2016

Superannuation is confusing enough, let alone when you have to think about Bankruptcy also. At Bankruptcy Experts Mount Isa we often have individuals asking us about what may take place to their super, and if you possess a regulated or industry fund (like most superfunds) then your super is secure, and Bankruptcy will have no impact upon your super. However, if you possess a Self-Managed Super Fund then you could find some troubles because there are certain things you can not do while 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 grown Australia-wide from 758,589 in 2009 to 1,011,689 in 2014. So what occurs to these Superfunds when it boils down to Bankruptcy?

Bankruptcy Experts Mount Isa

As I proposed previously, a basic option to your SMSF problem is to put your super back into a standard regulated managed fund prior to bankruptcy and save yourself all the complications outlined above.


First and foremost, if you are taking into consideration Bankruptcy, you can not be a part of a SMSF. Why? Because if you are going up against insolvency, you will be grouped as a ‘disqualified person’. And a disqualified individual can not function as an Individual Trustee. This poses a complication because normally most of the SMSFs are just 2 individuals, which implies the two of these users 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 acquainted with them all– for instance because you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can notice how an individual insolvency can be rather damaging to a SMSF and as you can imagine the process of Bankruptcy for a SMSF is rather complicated.

Irrespective if you call 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 encourage you to get both legal and financial advice before proceeding with any of the actions indicated in this post.

So what occurs 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 wish to consider your entire structure and ensure it is meeting the basic rules, consisting of things like having a new trustee that is not dealing with problems with Personal bankruptcy. The Australian Tax office will provide you a 6 month ‘grace period’ to get this completed before you face penalties. And take into consideration, sometimes the most optimal plan would be to simply roll the fund into an industry or corporate fund.

More than these large-scale restructuring concerns, there is a lot of paperwork to handle too, and you need to be continuously keeping the ATO updated of what is taking place. This suggests 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 Bankrupt will additionally 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.

During that 6 month duration you will have to remove the Bankrupt from the SMSF– including their property and assets. Bear in mind if you are uncertain call Bankruptcy Experts Mount Isa for some complimentary 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 certainly be a little bit diverse as you will want to appoint a new director (because it can not be you from now on) you will need to make a lot of tough decisions with this therefore contacting a professional is going to be vital. You can easily phone Bankruptcy Experts Mount Isa 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 troubles, it can influence the very existence of an SMSF. If you are at this moment 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 never uncomplicated, but getting appropriate advice is the most effective first step. If you wish to go over your approaches further, give us a call at Bankruptcy Experts Mount Isa or visit our website: or just call us on 1300 795 575.

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