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My accountant client has acquired a fund and is preparing the 2021 year. During the 2021 year funds from a rollover from an industry fund was deposited into the SMSF ($38k). However, this person is bankrupt and therefore, cannot be accepted as a member. She was born in Jan 1962 and it's unknown if she still works. What should the fund do?
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Hi David
Yes an undischarged bankrupt cannot act as trustee of a SMSF per section 120 of SIS so the normal approach would be to rollover their balance to an APRA Fund or convert the Fund to a small APRA Fund.
Section 120 of SIS defines who a disqualified person is.
DBA lawyers has an article on the topic at:
https://www.dbalawyers.com.au/smsf-compliance/new-option-for-smsfs-with-bankrupt-member/
DBA go through another option which is to apply to the Ferderal Court to allow the undischarged bankrupt to remain as trustee of the SMSF.
Section 126K of SIS states that:
"A disqualified person cannot be a trustee, investment manager or custodian of a
superannuation fund".
The undischarged bankrupt is a disqulified person so it is this section that would be qualified on and an auditor contravention report lodged for re your example.
Thanks
The Auditors Institute