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When a trustee goes bankrupt…

SMSF members need to be aware of the rules that govern their fund, including what to do when one member becomes bankrupt.

A requirement of an SMSF is that each individual trustee of the SMSF must be a member of the SMSF. In the case of corporate trustees, every member must be a director. This means all members are connected and held accountable for one another. If one member enters bankruptcy, they will be categorised by the ATO as a “disqualified person”, meaning they can no longer act as trustee of the SMSF.

Where a disqualified person continues to act as an SMSF trustee or director, they will be committing an offence that is subject to criminal and civil penalties. The ATO provides a six-month grace period to allow a restructure of the SMSF so that it either meets the basic conditions required or can be rolled over into an industry fund. During the six-month grace period, the ATO requires:

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News

SMSF property investment regulations to keep in mind

June 2, 2020

Property is a common investment option for SMSFs, however, the ATO has a number of regulations SMSF owners need to be wary of. The ATO is particularly concerned with those using SMSF assets to invest in property in a way that is detrimental to retirement purposes.

To ensure you do not breach provisions of the Superannuation Industry (Supervision) Act 1993 (SISA), here is a breakdown of the ATO’s common regulatory concerns:

Also keep in mind that you cannot improve a property or change the nature of a property while there is a loan in place. While you can look to make additional contributions to your SMSF to speed up the loan repayment process, you will be precluded from making further contributions to your SMSF if any outstanding loans in your super balance exceed $1.6 million.

In the case that any of the ATO’s regulatory concerns apply to you and your SMSF’s involvement with property investment, confirm your situation and report your circumstances to the ATO. Additional regulatory matters regarding income tax such as non-arm’s length income (NALI) provisions as well as GST need to be reported as well.