It goes without saying that there are exceptions to most rules, but it may come as a shock to learn that in particular circumstances, a Bankruptcy Trustee may actually be able to access the assets of a Self Managed Superannuation Fund (SMSF).
Generally, this shouldn’t be able to happen but a recent court case in November 2021, held that the assets of an SMSF were available to a bankruptcy trustee.
This wouldn’t usually be the case, so what happened in this instance for access to the assets to be permitted?
In this case, the trustees of the SMSF were the individuals who were bankrupt. The name of assets are always in the name of the trustee and on this occasion, the bankruptcy trustee was able to argue that there wasn’t enough separation between the individual’s assets and the SMSF’s assets. As a result, the assets of the SMSF were made available to the bankruptcy trustee.
So what can be taken from this ruling?
This case shows us is the importance of two things:
Separate your Assets
1.Firstly, it shows the importance of using a corporate (company) trustee for your SMSF. We always recommend this. One of the reasons we recommend this is for both administration purposes and more importantly, separation of assets. Separation of assets is important as it prevents the situation as what happened in this case.
Superannuation is a protected asset and the bankruptcy trustee shouldn’t have been able to access it, but due to poor structuring, they were.
Don’t Mix Entities
2.Secondly, it emphasises the importance of not mixing the use of entities. We are often asked if people can use a single company as a trading company and a trustee company. The answer is your can, but you shouldn’t. We recommend this so if something happens to one entity then, it doesn’t leave the other one vulnerable.
For your assets to be adequately protected, it’s crucial that you seek the advice of a professional. There is no ‘one size fits all’ solution and not getting your eggs in the right baskets could spell disaster.
If you currently use individual trustees or a single company for multiple purposes contact the expert team PCR Accounting & Advisory so we can conduct a full Tax & Asset Protection Review and ensure your trust structures are set up correctly.
Call us on 03 9847 7516 today.
Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.