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Bankruptcy and Your Superannuation – What You Need to Know

Bankruptcy and Your Superannuation – What You Need to Know


Superannuation is an important consideration during bankruptcy as it is a large factor in your quality of life, post-bankruptcy when retiring. Depending on how your Super is set up going into bankruptcy, you may need to make a few changes.

We have compiled some handy tips to help you know what steps you might need to take:

  • The money you have accrued in your Superfund is yours for retirement. The bankrupt estate will not absorb them.
  • If you have actively deposited monies or assets into your Super prior to becoming bankrupt, with the intention of preventing creditors from having access to these funds, the bankrupt estate can still consume them. They are not safeguarded.
  • Your statutory superannuation contributions are part of your salary and will remain protected. This process doesn’t change and will operate the same as it was pre-bankruptcy where your employer is responsible for the payment.
  • Your super fund will continue to communicate, the same as it did pre-bankruptcy.
  • If you have any savings from your income and would like to make a contribution to your Super you can. This is subject to the Superannuation laws permitting this action. It could be considered a deductible or nondeductible payment.
  • Any growth your Superfund has during the course of your bankruptcy is protected. It is yours to use for retirement.
  • During your bankruptcy, you are not able to be a trustee or director of the Trustee company for a Self-Managed Super Fund (SMSF). If you are currently a Trustee or Director of the Trustee company, you have 6 months to transfer the assets into an approved super fund such as an Industry Super Fund.
  • All assets transferred to your new super fund from your SMSF fund must be moved directly and remain there for the period of the bankruptcy.
  • In extenuating circumstances, if you have assets of substantial worth that are hard to move/sell, you may need to apply for a Part 4 Composition with your creditors. If creditors agree, you will be able to continue as a Trustee or Director of the Trustee Company of your SMSF.
  • If you are able to access your super fund due to being at retirement age or being legally able, do not obtain any amounts of money from your fund before bankruptcy. The money could be exposed to being absorbed by the bankrupt estate. Once you have become bankrupt, you can legally access your super and it is protected from the bankrupt estate this includes any purchases made with those funds.
  • If you can legally access your super and have declared bankruptcy, you can use monies within your super to help save assets that would usually be absorbed by the bankrupt estate. Some people have chosen to save their house using this model by buying it at valuation from the bankrupt estate, using the money from their super. It is a good idea to have a separate bank account for those monies to be paid into. This will help to track the assets to ensure they are protected.
  • If you get an income stream from your super fund, these monies are protected for you. It may mean that if your income extends beyond the income contributions threshold, you may need to pay a small percentage of the monies to the bankrupt estate. This will only happen if the extra monies push you over into the next tier of income contributions. For more information on income thresholds, you can find it here: Bankruptcy – An introduction to Income Contributions. It is important to note, that an income stream from your super fund does not behave like lump sums from your super. It cannot be used to save assets from being absorbed into the bankrupt estate.


For further information on bankruptcy, we recommend our articles Pathways to Bankruptcy – Essential Facts, Life During Bankruptcy and The Bankruptcy Option Explained.


Nicholls & Co has a complementary ‘help desk’ to answer your questions on bankruptcy. Call Nicholls & Co on 1300 782 614 or email








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 . Alan Nicholls, Registered Trustee in Bankruptcy is also available to answer your questions to enable you to decide if bankruptcy is right for you.