Talia was a member of an employer superannuation scheme that separated and held her money under “employee contributions” and “employer contributions”. Talia was adjudicated bankrupt in October 2018, she left her job with the employer in February 2020, and she was discharged from bankruptcy in February 2022.
In February 2023, Talia applied to withdraw her employee and employer contributions. Talia’s superannuation provider told her that, because of her bankruptcy, the terms of their trust deed said that her employee contributions had to be paid to the Official Assignee. They also said that they wanted to use their discretion under the trust deed and pay out the employer’s contributions to a third party or to Talia’s dependents, rather than directly to Talia.
Talia complained to FSCL.
Dispute
Talia said that because she applied to withdraw her funds after she was discharged from bankruptcy, both the employee and employer contributions should be released to her.
The provider explained that Talia only became entitled to her employee contributions under the trust deed when she left her job in October 2020. This meant that she became entitled to the money while she was still bankrupt, so it needed to be paid to the Official Assignee. What mattered was that she became entitled to the money while bankrupt, it didn’t matter that she had made the application to withdraw the money after her bankruptcy ended.
The provider also explained that the trust deed gave them discretion to pay Talia’s employer contributions to a third party or her dependents, rather than to Talia.
Review
We agreed with the provider. The terms of the trust deed meant that Talia became entitled to her employee contributions while she was still bankrupt, so that money had to be paid to the Official Assignee. It was also appropriate for the superannuation provider to pay the employer contribution directly to a third party or a dependent, because the trust deed was clear that they had this discretion.
Resolution
Talia accepted that her employee contribution needed to be paid to the Official Assignee and she provided a third party’s bank details for her employer contribution to be paid into. This resolved her complaint, so we closed her file.
Insights
The effects of bankruptcy can sometimes extend past the date that a person is discharged from their bankruptcy. This will depend on the source of the money, when the bankrupted person became entitled to it, and whether there are any terms or rules (such as under a trust deed) that apply.
