When debt becomes overwhelming, many Australians assume bankruptcy is their only option. In 2026, a Personal Insolvency Agreement (PIA) — also known as a Part X agreement under the Bankruptcy Act 1966 — provides an alternative that allows you to settle your debts with creditors without the full consequences of bankruptcy. Critically, your superannuation is generally protected in both bankruptcy and a PIA. Here is what you need to know.

What Is a Personal Insolvency Agreement?

A Personal Insolvency Agreement (PIA) is a legally binding arrangement between you and your creditors to settle your debts — typically at less than 100 cents in the dollar — as an alternative to bankruptcy. You retain control of your assets (subject to the agreement) and negotiate terms with creditors through an appointed controlling trustee, who must be a registered trustee under the Australian Financial Security Authority (AFSA).

What Happens to Your Superannuation in a PIA?

Superannuation is generally protected from creditors in both bankruptcy and a PIA in Australia. Under the Bankruptcy Act 1966 and relevant super legislation, super held in a complying superannuation fund cannot be claimed by a trustee in bankruptcy or creditors under a PIA — with limited exceptions for contributions made to defeat creditors.

  • Super in an APRA-regulated fund: Protected from creditors
  • SMSF super: Generally protected, but contributions made to defeat creditors may be clawed back
  • Super received as a lump sum before insolvency: May form part of divisible property if received and not spent
  • Pension payments already received: May be assessed depending on timing

PIA vs Bankruptcy: Key Differences in 2026

  • Duration: Bankruptcy lasts a minimum of 3 years; a PIA ends when the agreed terms are met
  • Asset control: In bankruptcy, a trustee takes control of divisible assets; under a PIA, you retain more control
  • Credit record: Both are recorded on your credit file (typically for 5 years) and the National Personal Insolvency Index (NPII) permanently
  • Income contributions: Bankruptcy may require income contributions if you earn above the indexed threshold ($67,237 for a single person, 2025-26); a PIA sets agreed terms upfront
  • Business impact: Bankruptcy disqualifies you from managing a company; a PIA may allow continuation subject to terms

How to Enter a Personal Insolvency Agreement

  • Engage a registered trustee (find one at afsa.gov.au)
  • The trustee calls a meeting of creditors, who vote on the proposed agreement
  • If creditors holding more than 50% in value (and number) agree, the PIA is binding on all unsecured creditors
  • You fulfil the agreed terms (lump sum, payments, asset transfer)
  • Upon completion, you are released from the debts covered by the agreement

Frequently Asked Questions

Will a PIA affect my tax obligations?

Yes. The ATO is a creditor in a PIA and must be included. Tax debts can be compromised under a PIA like other unsecured debts, subject to creditor vote. However, tax debts arising from fraud or evasion are not automatically provable in a PIA. Seek specialist tax advice before entering any insolvency arrangement.

Can I access my super to pay debts under a PIA?

Generally no — superannuation cannot be withdrawn early to pay creditors unless you meet a specific condition of release (severe financial hardship, terminal illness, etc.). Using super to pay debts in anticipation of insolvency may also constitute a preferential payment that can be clawed back.

How does a PIA affect my credit score?

A PIA is recorded on the National Personal Insolvency Index (NPII) permanently and on your credit file for 5 years from the date of agreement. Credit providers will see this record when assessing loan applications during that period.

Facing debt pressure and unsure of your options? Contact AWTS to understand the tax implications of debt agreements and insolvency arrangements.