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Working during bankruptcy
Becoming bankrupt doesn't normally prevent you from working, but it could have an impact on your income and employment. This page helps you to understand how it could affect you.
One of your obligations when bankrupt is to keep your trustee informed of any changes in your income or employment. For example, if you:
- change jobs
- receive higher or lower income (including government assistance)
- stop working.
How much can I earn?
There is no limit to the amount of income that you can earn while you're bankrupt. There is also no limit to the amount you can save during your bankruptcy. However, if your after-tax income exceeds a set amount, you may have to make compulsory payments. This amount changes with how many dependants you have.
Income contributions calculator
Use our income contributions calculator to estimate the annual contribution you may need to pay during bankruptcy.
What are contributions?
If your trustee determines you are earning over the income set amount, they'll ask you to pay income contributions. Contributions is the word we often use for compulsory payments from your income.
Your trustee can use these contributions to help repay your debts. Your trustee will notify you how and when you need to make payments. Compulsory income payments are:
- 50% of the amount you earn above the income threshold (set amount)
- paid by you to your trustee, and may go towards your creditors
- calculated by your trustee to determine the amount you need to pay, if any.
If you have any enquiries about these payments, contact your trustee.
For more information see: Official Trustee Practice Statement 1 - Income contributions.
Can I keep cash or money in a bank account?
The trustee can take any cash or money you have in a bank account at the date of bankruptcy.
During your bankruptcy, you can keep income that you save. However, if your after-tax income exceeds a set amount, you may have to make compulsory payments. This amount changes with how many dependants you have.
While you can keep income you earn after your date of bankruptcy, you can’t keep any property or assets purchased with this money.
Government assistance
Can I apply for government student loans?
Yes. Contact Study Assist to confirm your eligibility. If you apply for credit over a set amount, you need to disclose that you are bankrupt.
Will bankruptcy affect my family tax benefits?
No. They don't form part of your income assessment for compulsory payments.
Can I apply for Centrelink benefits?
Yes. Contact Centrelink directly to confirm your eligibility.
Is my spouse's income affected?
The trustee can only use your income to assess whether you need to make compulsory payments.
How payments from the Coronavirus Economic Response Package affect people in bankruptcy
Economic support payments - are not claimable by your bankruptcy trustee as income or as an asset, regardless of whether you receive the payments before or after the date of bankruptcy.
COVID-19 supplement payments - are claimable by the trustee if you receive them before the date of bankruptcy and it remains in your bank account when you become bankrupt. During bankruptcy these payments are included in your after-tax income amount. If your after-tax income exceeds a set amount, you may have to make compulsory payments
More information about these types of payment are available at Services Australia.
Early access to superannuation - Should you receive payments from your superannuation under the Coronavirus Economic Response Package, there is no change to the way this payment is treated in bankruptcy. See Is my superannuation affected? for details on what happens to your super during bankruptcy.
The Australian Taxation Office has more information about super payments on their website at Early access to your super.
For more information about how bankruptcy may affect your employment see Employment restrictions.
Can I keep my job if I'm bankrupt?
Bankruptcy doesn't stop you from working and normally we won't tell your employer you are bankrupt. However there are some restrictions to be aware of:
- Some professional or licensing bodies impose restrictions in some trades or professions. Contact them directly to ask if restrictions apply.
- There may be limitations to operating as a sole trader.
- You can't manage a trust account e.g. as a solicitor or accountant.
- You can’t be a director of a company or manage a company unless you have the permission of the court.
- You may not be able to hold certain public positions (e.g. senator or member of parliament).
Common professions that bankruptcy may affect are listed under employment restrictions.
Can I still be director of a company?
Not during bankruptcy. You are also unable to manage a company unless you have the permission of a court. For further company related enquiries, contact the Australian Securities and Investment Commission (ASIC).
Can I run my own business?
Yes; however, you may face some restrictions. If you're a sole trader, it's your responsibility to make sure you fulfil your bankruptcy obligations.
Your business name should contain your full name. This allows people to search for your name on the National Personal Insolvency Index (NPII) if they choose.
If your business name doesn't contain your full name, you must tell all people you do business with that you're bankrupt.
For example: David Smith is currently bankrupt. He has a sole trader business as a plumber. If his business name is 'Dave’s Speedy Plumbing', he must tell his clients that he's bankrupt. If his business name is 'David Smith Plumbing', he wouldn't need to tell anyone because it contains his full name.
Discuss this further with your trustee if you're unsure of your obligations.
Direct queries regarding your Australian Business Number (ABN) to the Australian Taxation Office (ATO).
If you have another type of company (ending in Pty Ltd) contact the Australian Securities and Investment Commission (ASIC).
For more information see Personal bankruptcy and the liquidation of a company