Bankrupt SMSF Trustees Allowed

17 Nov 2022

Written by

David Busoli, Principal

The case of Macalister [2021] FCA 1455 involves a successful application by the bankrupt directors of a sole purpose SMSF trustee company to be exempted from disqualification.

Generally, such directors have only two alternatives – they can roll over to an APRA fund or their SMSF can be converted to a small APRA fund. If an individual is an insolvent under administration that person can’t be a member of an SMSF or a director of its trustee unless the Federal Court grants leave for the insolvent under administration. The Macalisters sought leave to continue as directors of their SMSF and of its sole purpose corporate trustee.

The court’s primary consideration was the protection of the interests of third parties – shareholders, creditors, employees and the public at large, the applicants’ character and conduct and any risks to the company generally.

Neither the shareholder of the trustee company, the Macalister’s daughter, ASIC nor the ATO objected to the application.

Essentially, Mr and Mrs Macalister did nothing “sinister’ or illegal to cause their bankruptcy. They have otherwise conducted their affairs appropriately. The order was sought only in relation to the sole purpose SMSF trustee company of their SMSF of which they were the only members. They were successful.

I have linked the case document, with markups, so you can study the case yourself.

The circumstances of this case are a little special however there is now cause to consider the option of seeking leave from the federal court, instead of the standard two default options, when a member/trustee becomes bankrupt.

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