Superannuation is perplexing enough, let alone when you need to worry about Bankruptcy also. At Bankruptcy Melbourne we often have individuals asking us about what may happen to their super, and if you have a regulated or industry fund (like most superfunds) then your super is secure, and Bankruptcy will have no influence upon your super. Having said that, if you possess a Self-Managed Super Fund then you could get some concerns because there are various things you can not do when insolvent surrounding the management of finances.

This is really a growing concern with a lot of Australians in the last few years; the ATO informs us it has increased 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?

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As I proposed previously, a basic solution to your SMSF concern is to put your super back into a normal regulated managed fund before insolvency and save yourself all the problems described above.


Firstly, if you are considering Bankruptcy, you can not be a part of a SMSF. Why? Considering that if you are going up against insolvency, you will be grouped as a ‘disqualified person’. And a disqualified individual can not operate as an Individual Trustee. This poses a problem 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 be acquainted with them all– as an example the fact that you can not ‘know or suspect’ that one of you are bankrupt. So you can observe how an individual bankruptcy can be rather damaging to a SMSF and as you can picture the process of Bankruptcy for a SMSF is rather intricate.

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 assistance before proceeding with any one of the actions 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 want to be restructured. This means that you will want to think about your entire structure and make sure it is complying with the basic rules, incorporating points like maintaining a new trustee that is not dealing with issues with Insolvency. The Australian Tax office will provide you a 6 month ‘grace period’ in order to get this done before you face punishments. And consider, sometimes the most ideal strategy would be to just roll the fund into an industry or corporate fund.

More than these large-scale restructuring challenges, there is a huge amount of paperwork to cope with too, and you need to be continually keeping the ATO notified of what is occurring. This shows you have to let them know that you have a bankruptcy issue with your current trustee, that they are being eliminated as quickly as possible and let them know who the new trustee/director is. The Insolvent will likewise have 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 time frame you will have to remove the Bankrupt from the SMSF– including their property and assets. Remember if you are uncertain call Bankruptcy Melbourne 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 be a bit different as you will be required to appoint a new director (as it can not be you from now on) you will need to make a great deal of challenging selections with this therefore consulting with a professional is going to be essential. You can get in touch with Bankruptcy Melbourne for some free assistance on 1300 795 575.


From that you can notice how whenever it comes to Bankruptcy, despite the fact that one single member is handling issues, it can have an effect on the very existence of an SMSF. If you are at this point facing this matter yourself, or with a partner in a SMSF, please get financial advice to make sure you are meeting the ATO demands.


Bankruptcy is certainly never simple, but finding correct guidance is the best initial step. If you would like to go over your approaches further, contact us at Bankruptcy Melbourne or visit our website: or just call us on 1300 795 575.