Superannuation is confusing enough, not to mention when you have to stress over Bankruptcy as well. At Bankruptcy Experts Taree we frequently have people asking us about what will 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. However, if you possess a Self-Managed Super Fund then you might discover some issues because there are various things you can not do while insolvent surrounding the management of finances.
This is actually an increasing concern with a lot 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 comes down to Bankruptcy?
As I suggested previously, a fundamental option to your SMSF issue is to put your super back into a normal regulated managed fund prior to insolvency and save yourself all the issues described above.
First and foremost, if you are taking into consideration Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are confronting 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 generally most of the SMSFs are just 2 individuals, which implies the two of these participants 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 highly urge you to be aware of them all– for example because you can not ‘know or suspect’ that one of you are insolvent. So you can notice how an individual insolvency can be quite harmful to a SMSF and as you can envision the procedure of Bankruptcy for a SMSF is somewhat complicated.
Irrespective if you call us or somebody else it does not matter, just please don’t step into insolvency blind when it comes 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 steps pointed out in this post.
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 think about your entire structure and make sure it is complying with the basic rules, consisting of aspects like maintaining a new trustee that is not coping with issues with Insolvency. The Australian Tax office will offer you a 6 month ‘grace period’ to get this accomplished before you face punishments. And take into consideration, often the most optimal strategy would be to just roll the fund into an industry or corporate fund.
Beyond these large-scale restructuring issues, there is a lot of paperwork to deal with too, and you need to be continually keeping the ATO notified of what is occurring. This suggests you need 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 also 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 you will have to remove the Bankrupt from the SMSF– including their property and assets. Remember if you are not sure call Bankruptcy Experts Taree for some free advice 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 different since you will need to appoint a new director (simply because it can not be you anymore) you will need to make a great deal of tough selections with this so getting in touch with a professional is going to be essential. You can contact Bankruptcy Experts Taree for some free guidance on 1300 795 575.
From that you can notice how when it involves Bankruptcy, even though one single member is handling problems, it can impact the very existence of an SMSF. If you are at this moment facing this issue yourself, or with a partner in a SMSF, please get financial advice to make sure you are fulfilling the ATO requirements.
Bankruptcy is certainly never easy, but getting correct guidance is the very best first step. If you wish to go over your approaches further, give us a call at Bankruptcy Experts Taree or visit our website: www.bankruptcyexpertstaree.com.au or just call us on 1300 795 575.