How bankruptcy impacts property, employment, income and your superannuation

Restructuring Insights

The following table is an overview, in general terms, of the common examples of property retained by a bankrupt and available to a bankruptcy trustee based on the provisions of the Bankruptcy Act, 1966 and the various currently prescribed statutory limits, which are subject to change.

bankruptcy impacts

The table is not intended to be an exhaustive list as the law in this area is vast and can be affected by other laws including those pertaining to matrimonial/family law disputes.

Property retained by a bankrupt

Property available to a trustee

Vehicles - used by the bankrupt primarily as a means of transport to a statutory value/limit.


Tools of trade - property that is used by a bankrupt to earn income by personal exertion to a statutory value/limit.


The bankrupt’s household property – this refers to property that is reasonably necessary for the domestic use of the bankrupt’s household, having regard to current social standards and, subject to certain exclusions, includes furniture, kitchen equipment, sporting equipment, garden equipment, a television etc.


Property held in trust for another person and policies of life assurance/endowment assurance in respect of the life of the bankrupt and/or their spouse.


Superannuation - held by the bankrupt in a complying/regulated superannuation fund. Sentimental personal property subject to approval by creditors.

The value of a vehicle owned by the bankrupt in excess of the statutory limit.


Real property – the bankrupt’s share of equity in land and real estate.


After acquired property – this refers to property that is acquired after the commencement of the bankruptcy and before the bankrupt is discharged. It can include windfall gains, gambling/lottery wins and inheritances.


Cash and employment termination payments – however, it is common for a trustee to allow a bankrupt to retain sufficient cash to meet reasonable immediate living expenses.


Shares, bonds, debentures etc.


Intellectual property and digital assets such as Bitcoin and the like.

bankruptcy impacts

Employment in bankruptcy

Whilst the bankruptcy act does not impose any specific restrictions on employment in trades or professions for a bankrupt, we are aware that industry-specific licensing or registration authorities and associations may do so in the event of bankruptcy or entering into a formal bankruptcy alternative such as a personal insolvency agreement.

Potential impact of bankruptcy on trades and professions

Some common examples of trades and professions that may have rules and regulations applying to insolvency include builders, accountants, real estate agents, solicitors, travel agents, company directors/managers and gaming room employees.

This does not necessarily mean that a bankrupt cannot work in such trades or professions, however, it is noted as a guide to those contemplating bankruptcy or a formal bankruptcy alternative that restrictions or conditions may apply.

It is imperative that any person considering bankruptcy or a formal bankruptcy alternative reviews the relevant codes, guidelines or registration rules and eligibility requirements pertaining to their trade or profession before proceeding.

Termination of employment during bankruptcybankruptcy impacts

If a bankrupt’s employment is terminated during the period of bankruptcy (normally three years), any lump sum termination payments due will ordinarily be considered by the trustee as income.

Income in bankruptcy

If a bankrupt’s after-tax income exceeds a statutory prescribed limit, a contribution will generally be payable to the trustee during the bankruptcy term. If the bankrupt’s income does not exceed the statutory threshold no income contribution is payable unless the bankrupt wishes to make a voluntary contribution to their bankrupt estate.

The income that may be derived by a bankrupt before being required to contribute to their estate is affected by a number of factors including the number of their dependants. 

Superannuation in bankruptcy

The implications of bankruptcy for those with SMSFs are complex and for that reason are covered in a separate update.

For those that are not members of an SMSF, some of the key considerations in respect of superannuation to consider if bankruptcy is a possibility or you are currently an undischarged bankrupt are as follows:bankruptcy impacts

Superannuation payments received prior to bankruptcy

  • Remaining superannuation held as cash are generally claimable by your trustee in bankruptcy; and
  • Your trustee will generally be able to recover and sell assets that you have acquired from superannuation received prior to bankruptcy.

Superannuation payments received during/after bankruptcy

  • Superannuation payments received during and after bankruptcy are generally not claimable by your trustee in bankruptcy if it is a lump sum and your trustee would not generally be entitled to recover and sell assets you purchase with those funds.
  • Rather than a lump sum, if you receive superannuation payments effectively as a pension during your bankruptcy this is considered to be an income stream and will form part of your assessable income and be applied in the calculation of any compulsory income contribution that you may be liable to make during the term of the bankruptcy.

How can RSM help?

At RSM, we can help with all of your Restructuring and Recovery needs. Please reach out to your local RSM adviser if you want to discuss your current situation and the options available to help you.