Superannuation in a regulated super fund is generally protected and is not considered to be property divisible among creditors in a personal bankruptcy scenario. This means that superannuation is typically not available to pay off debts during bankruptcy.

Lump sums paid to a bankrupt during bankruptcy are also generally protected, including assets purchased with these funds. Monies drawn from superannuation prior to bankruptcy however are not protected and form part of the bankrupt’s estate (including assets purchased with the superannuation funds).

If during bankruptcy, a bankrupt receives “monies” from superannuation, such as through an account-based pension or annuity, it may be subject to income contributions or income payments assesment under the Bankruptcy Act. This means that a portion of the income may need to be contributed towards the bankrupt estate. At the time of writing (August 2023) if a bankrupt with no dependants earns $66,639 (after tax, and indexed twice a year), half of any net income above this amount goes towards repaying creditors. The applicable threshold depends on how many dependants a bankrupt has. See this link in this regard and current indexed amounts.

In some cases, a bankruptcy trustee may seek to access a portion of a bankrupt’s superannuation fund if contributions are out of character and it is believed that funds have intentionally been contributed in an effort to defeat creditors by moving assets or funds into superannuation before bankruptcy.

If any of your clients are contemplating bankruptcy or potentially being forced into bankruptcy, we are available for obligation and cost-free consultations to assist with informed decisions being made.

About the author

Kim Wallman is the principal of HLB Mann Judd Insolvency WA. He established the firm in 1995 and has over 35 years of experience in the insolvency and restructuring industry. Kim maintains his strong reputation through building trust, providing fair and expert advice and always maintaining an empathetic, compassionate mind-set.

If you have any queries about insolvency matters, please feel free to contact Kim on 08 9215 7900, 0411 619 256 or via email to

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