Entering bankruptcy does not normally prevent you from working. However, when you earn as a bankrupt, you may be required to pay income contributions towards your bankrupt estate. Whether you pay, and how much you pay, depends on your income.
Thresholds are set out by the Australian Financial Security Association (AFSA) and are dictated by the number of dependents you have during the assessment period. Dependants include children and other people who rely on you for financial support.
Thresholds amounts are updated by the AFSA twice a year on 20 March and 20 September. The thresholds current as at September 2024 are as follows:
| Number of Dependants | Income Limit |
| 0 | $71,826.30 |
| 1 | $84,755.03 |
| 2 | $91,219.40 |
| 3 | $94,810.72 |
| 4 | $96,247.24 |
| over 4 | $97,683.77 |
Importantly, it’s not only wages and salary that can assessed. Under section 139L of the Bankruptcy Act, a number of financial gains may be classed as income. These include:
Your bankruptcy trustee will typically make an estimated assessment of your income at the start of each year during bankruptcy. A further assessment based on your actual income will then be conducted at the end of the year. They use information and documents you are required to provide including an income questionnaire, pay-slips, bank statements, payment summaries and tax returns.
Once they have been through the information, they will issue you with an income assessment telling you how much you must pay. You will generally be allowed to pay this amount, known as your income contribution liability, in instalments from your income.
If your after-tax income exceeds the statutory threshold (based on your dependents) then you are liable to pay half of the surplus income above that threshold to your bankruptcy trustee.
For example, if your after-tax income is $96,000 and you have two dependents, the income threshold is $91,219.40. Since your income exceeds this threshold, the excess is $4,780.60 ($96,000 - $91,219.40). You would need to contribute 50% of the excess, which totals $2,390.30.
When your trustee is assessing your net income, they will automatically deduct child support payments or other payments required through family court.
In addition, in certain circumstances you may apply to your trustee for ‘hardship’. These circumstances are related to you experiencing significant financial pressure and include:
If the application is successful, it can result in a reduction of the amount of income contributions you need to make.
Failing to provide the required income information could lead to serious consequences. Your trustee may report an offence to AFSA, potentially leading to prosecution, or they could extend your bankruptcy by five more years.
If you fail to pay, the trustee may:
If you disagree with the trustee’s income assessment or their decision on ‘hardship,’ you can request a review by the Inspector-General. The review request must be lodged within 60 days of receiving notification. If you would like to discuss your current financial situation, don’t hesitate to reach out to us today at 1800 534 534.
For more information on bankruptcy, check out our bankruptcy page here.