The Government announced on 25 March 2020 measures to enable eligible individuals the ability to apply and receive tax-free early release of funds from their superannuation. The first withdrawal, of up to $10,000, could be made via an application from mid-April 2020. Also, another application can be submitted for a further $10,000 from 1 July 2020.
Since March 2020, there have been a lot of inquiries regarding the treatment of withdrawn superannuation before and during bankruptcy.
Early access to superannuation BEFORE bankruptcy
Withdrawn super funds before the commencement of bankruptcy, are an asset which can be claimed by the trustee. If an individual receives the early superannuation funds before bankruptcy, it is recommended they retain records to demonstrate how the funds were used for the trustee to review. Here is a table of how the super could be dealt with: -
|
What happened to the funds? |
Possible Action |
|
Purchased a car and its value is more than $8,000 |
The value of the vehicle above $8,000 is an asset. The trustee may sell the car, or a third party could pay the equity to the trustee. |
|
Purchased a car and its value is less than $8,000 |
The car will be a protected asset and not recoverable |
|
Purchased tools needed to earn an income, and the value is greater than $3,800 |
The value of the tools above $3,800 is an asset. The trustee may sell the tools, or a third party could pay the equity amount to the trustee. |
|
Purchased tools required to earn an income and the value is less than $3,800 |
The tools are a protected asset and not recoverable |
|
Used the money to pay bills |
The trustee may be able to recover the amount paid. |
|
Paid to creditors |
The trustee may be able to recover the amount paid. |
|
Paid the money to a friend or family member |
The trustee may be able to recover the amount paid. |
|
Money is still in the bank account |
The money in the account will be paid to the trustee. |
Please note that the above is a general guide only and is not an exhaustive list of the possible scenarios available. For specific enquiries, please contact us on 02 4908 4444 or bankruptcy@shawgidley.com.au and one of our specialist team will be able to provide guidance in this area.
Early access to superannuation AFTER bankruptcy
Early accessed superannuation that is withdrawn after the date of bankruptcy will be protected and not available to the creditors. Also, if the withdrawn superannuation is used to purchase an asset, the asset will also be protected.
If an individual accesses their superannuation early after bankruptcy, they should notify their trustee. The individual might be required to answer questions to assist with the administration of the estate.
If you, or your client, are concerned about the implications concerning early access to superannuation, particularly if bankruptcy is being considered, please contact us at Shaw Gidley and talk with an experienced, independent advisor for a confidential and informal discussion catered to unique individual circumstances.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.
