Successful bankrupt to continue as SMSF trustee director: Hunt [2026] FCA 389

By Bryce Figot, Cassandra Hurley on 09/04/2026 in SMSF cases & decisions, SMSF compliance, SMSF strategy, Trustee education

In Hunt, in the matter of Hunt (bankruptcy) [2026] FCA 389, McDonald J of the Federal Court considered yet another application by an undischarged bankrupt for orders permitting him to continue to act as director of a corporate trustee of a self managed superannuation fund (SMSF).

Bankruptcy has immediate consequences under both the Corporations Act 2001 (Cth) (CA) and the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA). A bankrupt is automatically disqualified from managing corporations and is further made a ‘disqualified person’ under the SISA. Continuing to act as a director whilst disqualified can result in the person committing offences under both the CA and the SISA, facing financial penalties and imprisonment of 2 years. A member of a SMSF who fails to adequately respond to disqualification risks causing the entire fund (not just their own balance) to lose its concessional tax treatment.

Facts

The applicant became bankrupt in November 2025, with significant liabilities owed to the ATO. Prior to this, he was the sole director and shareholder of a company acting as trustee of his SMSF. The applicant was currently the sole member of the SMSF, which held approximately $770,000 in assets and had consistently maintained complying status.

Upon bankruptcy, the applicant was automatically disqualified from:

managing corporations; and
acting as trustee of a superannuation entity.

Without relief, the fund would cease to satisfy the definition of an SMSF within six months. If so, this would expose it to the risk of becoming non-complying and suffering adverse tax consequences.

The fund had significant (over 10%) investments in a listed company that the sole member had co-founded and continued to consult for. Due to the conditions of the applicant’s consulting arrangement with the company, he was restricted in how he could sell these shares.

Decision

The Court granted relief under:

s 206G of the Corporations Act 2001 (Cth), permitting the applicant to manage the corporate trustee despite being a bankrupt; and
s 126J of the SISA, providing that the applicant not be treated as a disqualified person.

The relief was subject to strict conditions, including that:

the company act only as trustee of the SMSF; and
the applicant not act in relation to any other superannuation entity.

Reasoning

The Court emphasised that relief of this kind is discretionary. It must be exercised with regard to the protective purpose of the legislation.

In determining whether to grant relief, the Court considered factors such as:

the nature of the bankruptcy;
the applicant’s character and conduct;
the structure of the company; and
the potential impact on third parties.

Several considerations weighed in favour of the applicant. Importantly, the bankruptcy did not involve dishonesty or misconduct. (The applicant’s bankruptcy was due to a reassessment by the ATO and then failing to comply with the resultant payment plan agreement. However, the Court was confident that the applicant had not ‘demonstrated any dishonesty in his dealings with the ATO’ and that his inability to comply with the payment plan was due to a ‘sharp decline in the value of [his] assets … [and] due to adverse market conditions’.)

There was no suggestion of impropriety in his prior management of the fund. The SMSF was also relatively low risk — it had no employees or external creditors. The applicant was effectively the only person with a financial interest in the SMSF, and so the only member that could suffer by his management of it.

The Court also accepted that there were no practical alternatives — as the typical alternative expected when a member does not want to liquidated their entire balance and roll into a larger APRA regulated fund was not available to this particular member due to the restrictive conditions associated with the shares in the company of which he was the co-founder. Further, if the member was forced to sell the fund’s assets to a third party (and then roll his balance into an APRA regulated fund), the court noted that this liquidation ‘likely to be detrimental to the interests of third parties, namely that of the other shareholders.’ In connection with this point, the Court, interestingly, also considered that allowing the shares to continue to be held in the SMSF, without the Court orders sought being granted, would result in ‘significant tax consequences’ for the member.

Given all of the unique circumstances, permitting the applicant to continue in a limited capacity (and not sell the shares) was considered consistent with the statutory objectives. This was despite comments last year in Wake, in the matter of Wake (Bankrupt) [2025] FCA 1481, where Dessmann; Re Dessmann [2023] FCA 1019 was quoted:

Consistent with the principles that have developed in relation to s 206G of the Corporations Act, the applicant bears the onus of establishing that the Court should make an exception to the legislative policy underlying the prohibition in the Act [emphasis added]

An important observation about preparing for bankruptcy

When approaching bankruptcy, the applicant might have felt the temptation to illegally access money from his SMSF. However, it appears that he did not. (We stress that the case does not state this — this is mere conjecture.) As such, he was rewarded!

Consider s 116(2)(d)(iii) of the Bankruptcy Act 1966 (Cth) — it protects a bankrupt’s interest in a regulated superannuation fund from creditors. Accordingly, it is possible for a person to become a bankrupt and yet their superannuation survives ‘intact’.

Now consider what would have happened if — hypothetically — the applicant had illegally (or legally) accessed his superannuation. Firstly, that money would no longer be available to him for his retirement! Secondly, if the access was illegal (or the SMSF had any other compliance issues) the court probably would have taken a far dimmer view of the applicant and the risk that he posed to the SMSF or third parties. The Court might not have grant the relief sought and the applicant might have instead been forced to choose between:

selling the shares, to either roll his balance into another fund or have the fund be managed by another trustee as a SAF; or
leaving the SMSF as is, risking loss of the concessional taxation rates applied to compliant funds and committing offences each time he acted as a director to manage the fund.

In this regard, recall the case of Dessmann [2023] FCA 1019. In Dessmann various concerns existed that did not exist in Hunt. For example, in Dessmann, the court noted:

Several years of audits of the fund as required by s 35D of SISA had not been completed.
The former solicitor for Mr Dessmann holds security interests in the principal asset of the fund.
The principal asset is subject to a mortgage. The mortgagee has taken possession of that asset and Mr Dessmann has confirmed it will be sold.
The non-compliance of the fund was reported to the ATO. The fund is currently being audited by the ATO.

(For completeness, there are superannuation claw back provisions that can apply at times. These sorts of provisions apply where the bankrupt contributed assets to superannuation in order to hinder, delay or defeat creditors. See sub div B of div 3 of pt VI of the Bankruptcy Act 1996 (Cth).)

Finally, it should be noted that the applicant acted remarkably quickly to address how his bankruptcy may affect the SMSF. He acted within the defined windows to seek relief, provided regulators and creditors the appropriate opportunity to object to his proposal and approached a least one alternate trustee to manage the investments during his bankruptcy as a small APRA-regulated fund (SAF). It is likely that this preparedness and willingness to compromise on his outcomes weighed favourably for the applicant in the Court’s deliberations. It should be noted that applicants that wait too long risk reducing their options — advice should ideally be sought well before any bankruptcy, so as to maximise options if a scenario such as this arises.

Implications

This decision highlights several practical points for SMSF advisers.

First, bankruptcy will ordinarily disqualify an individual from acting in relation to an SMSF. However, the Court retains a limited ability to grant relief where the facts are abnormal and the risks are contained by the orders.

Secondly, relief is more likely where the SMSF is simple in structure and does not expose third parties to unacceptable risk.

Finally, timing is critical. The SISA provides only a six-month window before an SMSF may lose its status, meaning that prompt advice and action are essential.

Conclusion

Hunt demonstrates that the Court may adopt a pragmatic approach in appropriate cases, but only within narrowly defined limits. Bankruptcy remains a significant risk in the SMSF context. Reliance on court relief should be regarded as exceptional rather than routine.

Top Navigation

Navigation