Reading time: 3 minutes

It can be, but not necessarily.

On bankruptcy, the bankrupt’s property vests in the trustee in bankruptcy and any after acquired property vests in the trustee in bankruptcy as soon as it is acquired by, or devolves on, the bankrupt.  Such property is divisible amongst the bankrupt’s creditors.

A bankrupt’s interest in a superannuation fund is protected if the fund has made an election to become regulated under section 19 of the Superannuation Industry (Supervision) Act 1993 (Cth) (which is generally the case) and sections 128B, 128C and 139ZU of the Bankruptcy Act do not enable the trustee in bankruptcy to recover superannuation contributions.

Any superannuation planning strategies should be carefully documented to evidence the purpose of the contributions so as to minimise the risk that the main purpose of a contribution could be found to be to prevent, hinder or delay the transferred property from becoming divisible among the bankrupt’s creditors and liable to attack by a trustee in bankruptcy.

Here are some tips for everyone:

  • Make sure you are a member of a regulated superannuation fund.
  • Establish a pattern of superannuation contributions by making both concessional and non-concessional contributions, in particular at any time after receiving a substantial sum of money (e.g. inheritance).
  • Maximise concessional contributions in order to minimise assets exposed to creditors’ claims and maximise your tax benefits.  The contribution limits vary depending on your age and how much money you have in super, so do your homework and seek professional advice.  The annual cap is currently $25,000 for persons under 60 and $35,000 for persons over 60.
  • Make non-concessional (i.e. after tax) contributions in order to maximise your superannuation member balance for retirement and to establish a pattern of contributions, particularly if you receive a significant sum of money (e.g. inheritance) or are approaching retirement age.  The annual cap is $150,000, but persons under 65 can make a maximum contribution of $450,000 by bringing forward two years of contributions.

Here are some tips if you have a self managed super fund (SMSF):

  • Your SMSF should have a corporate trustee, not individual trustees.  As the SMSF’s assets are owned by the trustee, not the individual members, if an individual member is bankrupted the SMSF’s assets would not need to be transferred to a new trustee and there would be no dispute as to the capacity in which the assets are owned.
  • In order to comply with superannuation legislation you must be a director of the corporate trustee, but you do not have to own shares in the corporate trustee.  Any shares in the corporate trustee could be owned by your spouse or the trustee of a discretionary trust.

Please note that LegalVision is a commercial law firm and cannot assist with these matters.

Webinars

Key Considerations When Buying a Business

Thursday 11 November | 11:00 - 11:45am

Online
Learn which questions to ask when buying a business to avoid legal and operational pitfalls, so you can hit the ground running. Join our free webinar.
Register Now

Innovation Nation: How to Make the Most of Australia’s Business Innovation and Investor Visas

Thursday 18 November | 11:00 - 11:45am

Online
Want to expand your business into Australia? You need the right visa. Register for our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer