Superannuation contributions made prior to bankruptcy with the intention to defeat creditors will now be recoverable by bankruptcy trustees following changes announced today by the Attorney-General and the Minister for Revenue and Assistant Treasurer.
The amendments will address the High Court’s decision in Cook v Benson which cast doubt on a trustee’s ability to recover superannuation contributions using the existing ‘clawback’ provisions in the Bankruptcy Act.
In determining whether contributions were made to defeat creditors, courts will be able to take into account the person’s history of contributions and whether the contributions in question are ‘out of character’.
The Government has decided not to proceed with earlier proposals to allow for recovery of ‘excessive’ superannuation contributions as these would have unduly complicated both the bankruptcy and superannuation systems.
Today’s announcement is consistent with the Government’s plan to simplify and streamline superannuation.
The amendments will prevent unscrupulous debtors from transferring assets into superannuation when bankruptcy is looming. However, genuine contributions to superannuation for retirement income purposes will be protected from recovery.
The reforms had been developed following extensive public consultation. They strike an appropriate balance between encouraging people to save for their retirement and creditors’ rights to be paid what is owing to them.
The amendments apply to superannuation contributions made after today. Legislation giving effect to this announcement will be introduced as soon as practicable.
Further details of the changes can be found on ITSA’s website: www.itsa.gov.au