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I have a fund where the trustee withdrew funds from the SMSF prior to Bankruptcy and during bankruptcy. How do you treat the withdrawals is it a reportable contravention. He has no intention to repay the funds. He has also continued to be a trustee of the SMSF and I am aware that I will have to report the contravention as it has breached s17A of SISA.
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Hi Signorina
Thanks, I do not have detailed experience with bankruptcy and having to repay debts so my comments are of a general nature. My view is legal advice should be obtained. If other members have any views that would be appreciated.
My comments are that as a bankruptcy trustee was appointed they should have made investigations as to whether the person has assets to pay creditors. They would also review their earnings and whether they were required to make payments (if they earn over a set amount).
The individual should have listed the amount owing to the Fund as a creditor so I would expect that the bankruptcy trustee / court should have written to the Fund / trustees detailing the action that is being taken.
Once you understand the action being taken re the bankruptcy you can determine what needs to be done / lodged re the ACR.
Regards
SMSF AAA
Thanks
SMSF AAA
Hi Signorina
Yes section 120 of SIS refers to disqualified person to include a person who is an undischarged bankrupt. Section 17A of SIS states that a disqualified person cannot be a trustee of a SMSF. I agree you would lodge an audit contravention report (ACR) re the breach of Section 17A.
In relation to the withdrawals I assume the member has not met a condition of release. My view is that you would also lodge an ACR in relation to a breach of (subject to the ACR instructions):
1) Section 62 - the sole purpose test (fund not being maintained to provide benefits to members when they are allowed to access them).
2) Section 65 - Fund has lent money / provided financial assistance to a member.
3) Section 82-85 - Fund has breached the in-house asset rules.
4) Reg 5.08 - minimum benefits have not been maintained.
Thanks
SMSF AAA