Superannuation is confusing enough, not to mention when you should stress over Bankruptcy also. At Bankruptcy Experts Parramatta we frequently have people questioning us about what can take place to their super, and if you have a regulated or industry fund (like most superfunds) then your super is safe, and Bankruptcy will likely have no influence upon your super. Nonetheless, if you possess a Self-Managed Super Fund then you might get some problems because there are certain things you can not do when bankrupt 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?
As I suggested earlier, a basic solution to your SMSF issue is to put your super back into a standard regulated managed fund prior to insolvency and save yourself all the troubles described above.
First and foremost, if you are thinking about Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are confronting 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 challenge because generally 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 lot of legal rules, and if you are in this position I would highly urge you to be aware of them all– for example because you can not ‘know or suspect’ that one of you are bankrupt. Therefore, you can observe how an individual bankruptcy could be rather damaging to a SMSF and as you can imagine the procedure of Bankruptcy for a SMSF is somewhat convoluted.
Regardless if you contact us or somebody else it does not matter, just please don’t walk into insolvency blind when it concerns 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 decisions suggested in this article.
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 want to think about your entire structure and ensure it is meeting the basic rules, including points like having a new trustee that is not coping with issues with Personal bankruptcy. The Australian Tax office will offer you a 6 month ‘grace period’ in order to get this done before you face penalties. And consider, often the most optimal plan would certainly be to simply roll the fund into an industry or corporate fund.
Beyond these large-scale restructuring concerns, there is a great deal of paperwork to handle too, and you need to be continuously keeping the ATO notified of what is happening. This suggests you need to let them know that you have a bankruptcy issue with your current trustee, that they are being removed as soon as possible and let them know who the new trustee/director is. The Insolvent will also need to inform the ATO using the form NAT 3036 (Found on the ATO website) and they have to also notify ASIC of their resignation.
During that 6 month period of time you will need to remove the Bankrupt from the SMSF– including their property and assets. Just remember if you are uncertain call Bankruptcy Experts Parramatta for some complimentary assistance on 1300 795 575.
What if I use a single member fund?
However, if you are a single member fund the Bankruptcy can be a little bit varied as you will be required to designate a new director (since it can not be you anymore) you are going to need to make a great deal of tough selections with this and so getting in touch with a professional is going to be essential. You can easily get in touch with Bankruptcy Experts Parramatta for some free guidance on 1300 795 575.
From that you can acknowledge how whenever it comes to Bankruptcy, despite the fact that one single member is taking care of concerns, it can influence the very existence of an SMSF. If you are at this moment facing this matter yourself, or with a partner in a SMSF, please seek financial advice to make sure you are fulfilling the ATO requirements.
Bankruptcy is certainly never easy, but getting appropriate suggestions is the best initial step. If you wish to go over your choices further, give us a call at Bankruptcy Experts Parramatta or visit our website: www.bankruptcyexpertsparramatta.com.au or just call us on 1300 795 575.