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Wednesday, 28 March 2007
Page: 142

Mr KEENAN (7:24 PM) —I also rise to support the Bankruptcy Legislation Amendment (Superannuation Contributions) Bill 2006. I note the opposition’s support for it, which is reasonable considering this is a bill that really is common sense. It is a bill that arose in response to the High Court’s decision following the judgement in the Cook v Benson case, when it was discovered that the law had the adverse effect of making it extremely difficult for bankruptcy trustees to recover superannuation contributions made by someone in the lead-up to bankruptcy.

The purpose of this legislation is quite simple: it is to stop people from getting out of paying their bankruptcy debts by putting their money into superannuation prior to the order being served. I think most of the community would expect that someone who was seeking bankruptcy protection would still make every effort they could to pay their creditors. And I believe that the community takes a very dim view of people using the law to squirrel away assets that should rightly be put before the bankruptcy trustees to pay out creditors.

The bill will amend the Bankruptcy Act 1966 so that bankruptcy trustees can recover these deceptive superannuation contributions that have been made with the specific aim of dodging creditors. As I said before, the amendments come in response to the High Court’s decision following judgements made in the Cook v Benson case, which had the adverse effect of making it extremely difficult for bankruptcy trustees to recover superannuation contributions made by someone in the lead-up to bankruptcy. This was the case even where those contributions were very clearly made with the specific intention of defeating creditors.

Because this meant that a person facing bankruptcy could transfer assets into superannuation to avoid paying creditors, the integrity of the entire bankruptcy system had been called into question. I am sure everyone would agree that this is not an appropriate way of avoiding paying what can often be very large debts, when others who cooperate and behave with integrity and honesty are penalised. You could even argue that these acts of deception could be used as a way of generating wealth through the thinly veiled guise of putting something away for retirement and then applying for bankruptcy protection. The High Court’s decision also meant that superannuation assets are treated differently from other assets that would be available to the trustee.

The amendments will apply to superannuation contributions made on or after 28 July 2006. The amendments will strike a much needed and appropriate definition of what is meant by saving for the future and what is an unscrupulous way of attempting to get out of paying debts incurred in the lead-up to bankruptcy. It is important to note that these amendments will only allow superannuation contributions to be recovered where there has been deliberate action by the bankrupt to avoid paying creditors. The new provisions will ensure superannuation contributions made with that intent are recoverable just as it is with other transfers, including property. They will apply to superannuation contributions made by the bankrupt for his or her own benefit or for the benefit of a third party.

In addition, those provisions will apply to contributions made by a third party for the bankrupt’s benefit where the bankrupt was involved in an arrangement with that third party specifically to defeat their creditors. One example of this deception is when the bankrupt enters into a salary sacrifice arrangement with their employer to build up superannuation assets in the lead-up to bankruptcy instead of building up other assets that would have been available to pay creditors. The new rules will allow the trustee to assume that superannuation contributions are made with the intention to avoid creditors where the bankrupt was insolvent at the time of making the contributions. I think the intent of my remarks is very clear and I yield the floor to the minister.

Question agreed to.

Bill read a second time.