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Bankruptcy (Estate Charges) Amendment Bill 2001

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1998-1999-2000-2001

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

BANKRUPTCY (ESTATE CHARGES) AMENDMENT BILL 2001

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

(Circulated by authority of the Attorney-General,

the Honourable Daryl Williams AM QC MP)

 

 

 

 

 

 

 

 

 



 

BANKRUPTCY (ESTATE CHARGES) AMENDMENT BILL 2001

 

Section 1 - General Outline

 

The Bankruptcy (Estate Charges) Amendment Bill 2001 (the Bill) is a short Bill that will amend the Bankruptcy (Estate Charges) Act 1997 (the Act) to exempt any surplus in a bankrupt estate from the scope of the realisations charge, remove current payment obligations for the interest charge and the realisations charge if the amount otherwise payable is less than $10 in a charge period, close some charge-avoidance opportunities and simplify some machinery provisions of that Act. 

 

Financial Impact Statement

 

2          It is expected that the Bill will have an unquantifiable but minimal financial impact.  Small net benefits to the Commonwealth could arise from applying the realisations charge to section 73 amounts, and from the introduction of a minimum remittance requirement of $10.  Aligning the charge periods to the financial year will have a timing impact on revenue in the transitional year because the due date for charge payments will be deferred by 2 months, but overall revenue will be unaffected.  Other measures in the Bill are expected to have no financial impact.

 



Section 2 - Notes on sections

 

Short Title

3          By proposed section 1, the Act will be cited as the Bankruptcy (Estate Charges) Amendment Act 2001 .

 

Commencement

4          By proposed section 2, the Act will commence at the same time as the Bankruptcy Legislation Amendment Act 2001. 

 

Schedule

5          Proposed section 3 is a drafting device to allow all the amendments proposed to be made to the Act to be set out in a Schedule.  The items in the Schedule will amend the Act and will have effect according to their terms.  Notes on the proposed Schedule items, including those proposing transitional provisions, follow.

 

Section 3 - Schedule

 

Schedule 1—Amendments and Transitional Provisions

 

6          This schedule sets out all of the amendments proposed to be made to the Bankruptcy (Estate Charges) Act 1997 .

 

Part 1—Amendments

 

Alignment of charge periods with financial year

7          Item 1 proposes an amendment to the definition of charge period in subsection 4(1) of the Act.  Charge period means a period of six (6) months commencing on 1 January or 1 July.  This amendment proposes that the charge periods will run from 1 January to 30 June and from 1 July to 31 December, respectively, rather than for the 6 months commencing 1 November and 1 April, respectively, as at present.  The change is being made to align the charge period with financial years and thereby to simplify trustee’s obligations when reporting to the Inspector-General.

 

Interest charge amounts under $10

8          Item 2 proposes the insertion of a new subsection 5(1A) in the Act.  Under the proposed subsection, no interest charge will be payable by a trustee in respect of an account for a charge period if the amount of the charge would be less than $10, or such higher amount as is prescribed by the regulations.  The amendment is intended to reduce handling costs for trustees and the Commonwealth alike.

 

Interest charge payment period extended to 35 days

9          Item 3 proposes to amend subsection 5(4) of the Act by omitting 21 days and substituting 35 days.  This change is to allow trustees a longer period in which to make payment of the interest charge liability than the presently-allowed 21 days after the end of a charge period.  With the change to align charge periods with the financial year, if charge were

payable within 21 days after the end of a charge period, it would become due for payment respectively by the 21 January or the 21 July next following the end of each respective charge period.  These payment dates might be inconvenient for trustees because of the pressure of other business at the end of a financial year and because of the holiday period in January.  Accordingly, an extended period of 35 days is proposed to allow for payment of the charge liability for each charge period.

 

Realisations charge to apply to section 73 arrangements

10        Item 4 proposes the insertion of new paragraph 6(1)(aa) by which realisations charge will be imposed on an amount received by a trustee of a composition or a scheme of arrangement under Division 6 of Part IV of the Bankruptcy Act 1966 .  This measure extends charge to section 73 compositions and schemes of arrangement.  The incidence of the charge on Part X compositions and schemes of arrangements together with the current absence of charge on section 73 compositions or schemes of arrangements has resulted in fewer Part X arrangements, and more arrangement under Division 6 of Part IV of the Bankruptcy Act 1966 .  This measure will restore neutrality between the two provisions as far as the incidence of the charge is concerned.

 

Realisations charge amounts under $10

11        Item 5 proposes the insertion of new subsection 6(1A) of the Act.  No charge is to be payable by a trustee for a charge period in respect of a particular estate, deed, composition or debtor (as the case requires) if the charge payable would be less than $10, or such higher amount as is prescribed by the regulations.  The change made by this proposed amendment is to the same effect as that proposed by item 2 but is proposed in relation to the realisations charge rather than the interest charge.

 

Realisations charge payment period extended to 35 days

12        Item 6 proposes an amendment to subsection 6(3) of the Act to apply the same revised arrangements for realisations charge payments as item 3 proposes in relation to the interest charge: see the notes on item 3.

 

Charge not payable on estate surplus

13        By item 7, new section 6A is proposed to be inserted.  It would provide to the effect that charge is not payable on an estate surplus.  Under the current provisions of the Act, charge is payable on a surplus in an estate, ie, on any amount in excess of that needed to pay off the bankrupt’s debts.  By this proposed amendment, if the trustee receives an amount in respect of a bankrupt’s estate and, as a result, the trustee becomes able to pay off all the bankrupt’s debts, any excess of the received amount, and also any amount later received by the trustee in respect of the estate, is disregarded in determining the amount on which realisations charge is payable.  Proposed subsection 6A(2) would provide that bankrupt’s debts has the meaning that it has in subsection 153A(6) of the Bankruptcy Act 1966 .

 



Certain amounts treated as being received by trustee

14        Item 8 proposes to insert new section 7A which will be an anti-avoidance provision having the effect of treating, as received by the trustee and thus subject to the realisations charge, an amount that is applied or dealt with on behalf of the trustee or in accordance with the trustee’s directions. 

 

15        This measure is intended to ensure that the realisations charge falls on amounts which, in the ordinary course, the trustee would receive as part of the administration of an estate.  Regrettably, avoidance arrangements have ensured, at times, that amounts are not received by the trustee and thus are not subject to charge.  The measure makes clear that some amounts are to be subject to charge even though not received by the trustee.  For example, a trustee might direct that amounts ordinarily receivable by him or her in the capacity of trustee be paid, instead, into a solicitor’s trust account and distributed from there.  The amount does not come into the hands of trustee and, arguably charge is avoided.  Such efforts to avoid the incidence of the charge will be negated by the proposed amendment.

 

Regulations

16        Item 9 proposes to insert a new Part, Part 4—Miscellaneous, in the Act.  It will contain proposed new section 9 to provide that the Governor-General may make regulations prescribing ‘matters required or permitted by the Act to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to’ the Act.  This is the standard wording of a regulation-making power included in many Acts and is proposed to be included so as to ensure that regulations may be made under the Act.

 

Part 2—Transitional provisions.

 

17        Item 10 proposes the insertion of 2 definitions into the Act.  The first is of commencing time which means the time when the Bill becomes an Act and commences; and the second is of Estate Charges Act which means the Bankruptcy (Estate Charges) Act 1997 .

 

18        Subitem 11(1) proposes commencement arrangements for item 1.  They are that, if the Act commences during an old charge period ending on 30 April, that charge period is extended by 2 months until 30 June, and the amendment made by item 1 to align the charge periods with the financial year will apply from the 1 July immediately following that 30 June. 

 

19        However, by subitem 11(2), if the Act commences during an old charge period ending on 31 October, that charge period is extended by 2 months until 31 December and the amendment made by item 1 to align the charge periods with the financial year will apply from the 1 January immediately following that 31 December. 

 

20        By subitem 11(3), old charge period will mean a charge period within the meaning of the Estate Charges Act but ignoring the amendment made by item 1.

 

21        Item 13 proposes that the amendments made by items 3 and 6 will apply to charge periods that end after the commencing time, as defined in item 1.

 



22        By item 14, item 4 will apply to compositions and schemes of arrangement accepted by creditors after the commencing time.  The amendment therefore will not apply to existing compositions and schemes or those which are accepted by the creditors up to the commencing time.

 

23        By item 15, the amendment made by item 7 will apply to amounts received after the commencing time.

 

24        Item 16 proposes that the amendment made by item 8 will apply to amounts that are applied or dealt with after the commencing time.