The Bankruptcy Act 1966 does not restrict a bankrupt from being employed and earning an income during their bankruptcy. However, if your after-tax income exceeds a certain amount you will have to pay contributions from your income to your trustee.
The Bankruptcy Act does not require bankrupts to disclose their bankruptcy when applying for employment. However, a prospective employer might ask for this information or choose to search the National Personal Insolvency Index (NPII) to find out.
Many professional associations and licensing authorities have their own conditions around bankruptcy of their members. This is not regulated by the Bankruptcy Act and is at the discretion of the each body. You should confirm directly with the organisation of which you are a member as to whether bankruptcy will affect your professional membership or your ability to practice a particular trade.
Under the Corporations Act 2001, bankrupts are prevented from managing corporations unless they obtain approval from the court. The Corporations Act is administered by the Australian Securities and Investments Commission (ASIC) and enquiries about companies should be directed to ASIC.
What happens to my income while I am bankrupt?
If your after-tax income exceeds a certain amount you will have to pay contributions from your income to your trustee. You will be required to pay half of the amount you earn above your threshold to your trustee.
Your trustee will calculate the amount you are liable to pay for each year of your bankruptcy and will send you a notice of assessment that outlines the total amount due, instalments (if applicable) and how to make your payments.
What is “assessed income”?
The Bankruptcy Act defines what the trustee should include when assessing the income of a bankrupt. It is important to note that this differs from the Australian Taxation Office’s (Tax Office) assessment of taxable income.
The trustee’s assessment will include (but is not limited to) a consideration of your:
• wages and salary from all jobs
• tax refunds
• taxable fringe benefits
• salary sacrifice arrangements
• superannuation receipts, annuities and pensions
• business profits
• loans from associated entities
• income you earn which is paid to someone else (including to a company or trust)
• superannuation contributions in excess of 9% made by an employer that arise from an industrial agreement solely between you and your employer
• income earned overseas.
If your circumstances change, you must advise your trustee immediately if your income or number of dependants changes, or you think these details will change in the next 12 months. If you fail to do so, your assessment may be incorrect and you may pay too much or not enough.
Here at The Quinn Group, the dedicated team of Lawyers and Accountants at can assist you with advice and assistance for your bankruptcy needs. Contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.