+ Superannuation and Asset Protection

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There are three issues to be considered here. First of all, lump sum payments out of a regulated super fund are protected - not being income and therefore not caught by s139S of the Bankruptcy Act. Such payments of course, in order to protect the integrity of the superannuation fund, must comply with the Superannuation Industry (Supervision) Act 1993 and associated regulations.

Secondly, many people are aware that excessive superannuation contributions beyond the historical level of contributions can be clawed back under section 128B of the Bankruptcy Act but few people are aware that standard payments to a self-managed super fund can also be challenged despite Cook v Benson (2003) 214 CLR 370. That case dealt with an earlier wording of section 120 of the Bankruptcy Act so the best way to safeguard the standard payments into a superannuation fund is to maximise the use of a reserve account in conjunction with using a forfeiture clause which does not breach section 302A of the Bankruptcy Act.

Thirdly, as regards the now famous Richstar decision, people facing financial difficulties should consider relinquishing by way of deed, their interests as a discretionary beneficiary under a discretionary trust. They could then keep control of the discretionary trust by maintaining their power of appointment. The power of appointment does not vest in the trustee in bankruptcy. Once out of bankruptcy, the deed of relinquishment can be reversed providing all relevant parties consent. See Stephens v Stephens [2007] FamCA 680.

Needless to say, none of these suggestions has been tested and we do not warrant that they will work!

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