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Bankruptcy and your Superannuation – a heads up

Bankruptcy & Superannuation

Bankruptcy & Super

When you become bankrupt your super that has been progressively accumulated over time is safe.

Most people, hold their super in a retail or industry fund. A lesser number of people have a Self-Managed Super Fund (SMSF). A professional funds manager administers retail and industry funds while the beneficiary of the fund manages a Self-Managed Super Fund (SMSF).

Due to the different management structures, these two types of super funds have different scenarios when you become bankrupt. Below is a summary of what happens:

A/ Industry or retail fund.

Nothing will change for you if your super is held in one of these funds. Your super monies remain in the fund the same as prior to bankruptcy. The super fund administrator continues to send you reports for your super account. The Trustee of your bankruptcy does not replace you or become involved in your communication with the fund. Your employer continues to pay your Statutory Super to the fund while you are bankrupt.

B/ Self-Managed Super Fund (SMSF).   

While you are bankrupt, if your super is held in one of these funds, you are not able to be the trustee of your SMSF. If your SMSF has a corporate trustee, you cannot remain as director of that company. This means that the assets of your SMSF will need to be realised and the funds directly rolled over to a complying retail or industry fund. You have 6 months from when you become bankrupt to do this. If the assets of your SMSF are not readily realisable, this may result in you having to realise the asset for an amount that is less than you would like. You do, however, have the option of proposing a Part 4 Composition to your creditors. If a creditors meeting approves your proposal by special resolution, your bankruptcy is then annulled, and you will not be required to realise the assets of your SMSF. You can then continue as your SMSF’s trustee or director of your SMSF’s corporate trustee.

Further Reading:

For more information on bankruptcy and your superannuation, click here.

Enquiries:

We hope we have been able to give you a quick insight to help you to consider how your bankruptcy may impact your superannuation.

For answers to your questions regarding your situation or bankruptcy generally, you are welcome to give us a call on 1300 060 122 or email: helpdesk@nichollsco.com.au

Thank you for visiting our site.

Alan Nicholls - Registered Trustee

Alan Nicholls’ no obligation help desk

Nicholls & Co provide a free, no obligation ‘help desk’ for people considering bankruptcy – we discuss and explain bankruptcy and answer questions for anyone who is considering bankruptcy. The Nicholls & Co help desk can be accessed by phone  
1300 060 122  or helpdesk@nichollsco.com.au . Alan Nicholls, Registered Trustee in Bankruptcy is also available to answer your questions to enable you to decide if bankruptcy is right for you.