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Thursday, 17 February 2005
Page: 37

Mr SLIPPER (11:31 AM) —I am pleased to join the debate on the Bankruptcy and Family Law Legislation Amendment Bill 2005. For too long in the parliament governments of both political colours have referred bills to Senate committees for consideration and report. However, the bill before the chamber was referred to the House of Representatives Standing Committee on Legal and Constitutional Affairs, which I now chair but which was then chaired by my colleague the honourable member for Mackellar. I believe that there ought to be a greater use of House committees and, while the Attorney is at the table, I encourage the government to in future refer bills to the House committee rather than the Senate committee. I realise of course that, with a committee system in both places, you have to be even-handed.

Mr Ruddock —We will keep you fully occupied.

Mr SLIPPER —Thank you, Attorney. I recall that, when I was in opposition and Mr Lavarch was the Attorney-General and the honourable member for Denison was the Minister for Justice, the then Standing Committee on Legal and Constitutional Affairs could not get any references from the then ministers. I made a comment at a committee meeting that I did not know why the ministers would not give the committee references and Michael Duffy, who was on the committee, turned to me and said, `They know they can't tell us what to do.' I thought that was a very interesting response.

This bill is part of the Howard government's ongoing reform of the family law and bankruptcy law system and follows up the recommendations of a joint task force report. This is a very difficult and complicated area of law and there has had to be, as indeed there has been, appropriate consultation with interest groups. It is important to get the law right and, as the honourable member for Gellibrand indicated in her contribution, this is an area which does require ongoing attention. The joint task force comprised officers of the Attorney-General's Department, the Australian Taxation Office, Insolvency and Trustee Service Australia and Treasury and it examined the use of bankruptcy in family law schemes to avoid the payment of tax. There has been a lot of concern about certain high-income individuals, such as barristers, not paying their obligations to the community, and in the executive summary of the report of the task force these words appear:

A small but significant number of high-income tax debtors, typically high earning fee-for-service professionals, use bankruptcy to avoid paying the tax that they owe according to the law. These debtors have the ability to pay their debts, but instead fund a lifestyle made possible only through the non payment of tax and the build up of assets in the names of related parties. Typically the ATO is the sole or most significant creditor and the dividend distributed to creditors by the trustee in bankruptcy amounts to only a few cents in the dollar. The inequity of this device is compounded as some offending debtors divert income and assets to other parties in a manner designed to thwart the capacity of the trustee in bankruptcy to realise their value for the benefit of the ATO or other creditors.

I do not believe that any reasonable person in our community would see this as being in any way an acceptable situation. It is, however, appropriate to look at the law very carefully because when you do make substantial changes you want to make sure that the changes do not bring in more inequities than the amendments seek to remove.

This bill removes family law loopholes for bankrupts seeking to avoid payment of debts and makes it harder for bankrupts to avoid their obligations to pay income contributions. This government is a government which likes to go out and consult with the Australian community on major law change. At times there has been comment that it takes a while for legislation to actually hit the statute books, but I believe that it is appropriate to get the legislation right or as right as you can at the time. This bill responds to public comment on the exposure draft of the Bankruptcy Legislation Amendment (Anti-Avoidance and Other Measures) Amendment Bill 2004 and submissions made about that bill to the House of Representatives Standing Committee on Legal and Constitutional Affairs. It is interesting to note that the committee, which at that stage had members of both political parties on it, recommended that the amendments proceed, and that is exactly what the government is doing with this particular legislation.

In keeping with our ongoing reform of bankruptcy services, this bill addresses the interaction of laws relating to bankruptcy and family law. As I said before, it implements key recommendations of the joint task force report entitled The use of bankruptcy and family law schemes to avoid payment of tax. The most significant amendments contained in the bill are designed to harmonise the law that applies to the division of assets upon insolvency and upon the breakdown of a marriage and, in particular, to the interaction between the Family Law Act 1975 and the Bankruptcy Act 1966. Honourable members would be aware that the government has already introduced amendments under part 19 of the Family Law Amendment Bill 2004 to address the use of family law schemes, such as financial agreements and property orders, to avoid the payment of debts. The present bill sets up a fairly comprehensive regime of changes to the two acts I mentioned before which are designed to overcome uncertainty and hardship for the non-bankrupt spouse and/or creditors where those two areas of law interact. There are a number of schedules to the bill, each of which makes significant and positive changes.

This is important legislation. It is legislation which has been well thought out and widely discussed in the community. It has resulted from a report, and that report has in turn been investigated by a committee. So, despite what the member for Gellibrand has said, this legislation is legislation which I believe is appropriate. I believe that this legislation is good in its present form. My own view is that the amendment moved in the other place by the opposition is not necessary. However, I say that with a caveat: I do believe that bankruptcy and family law are very complicated and difficult areas where governments must react to changed circumstances and to public perceptions. I suggest that looking at bankruptcy and family law and how these interact will remain a work in progress into the future. I commend the bill to the House.