The downturn in the economy is predicted to result in higher numbers of personal bankruptcy proceedings and corporate insolvency.
Trustees should act early to restructure their SMSF benefits before bankruptcy proceedings commence. A person who is an insolvent under administration is not allowed to act as trustee of superannuation entities. Hefty penalties apply to contravention of the SIS Act ‘disqualified person provisions’.
In addition, a trustee issue arises if disqualification of the trustee means that the SMSF no longer has a trustee with the legal capacity to act on its behalf. Under the SIS Act, legal personal representatives cannot act on behalf of disqualified trustees.
Any person facing insolvency would be prudent to replace themselves as either trustee or director of a SMSF trustee in order to avoid further legal complications.
