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Bankruptcy and Family Law Legislation Amendment Bill 2005

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2004-2005

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

SENATE

 

 

 

 

 

 

BANKRUPTCY AND FAMILY LAW LEGISLATION AMENDMENT BILL 2004

 

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

 

 

Amendments and New Clauses to be Moved on Behalf of the Government

 

 

 

 

 

 

(Circulated by authority of the Attorney-General,

the Honourable Philip Ruddock MP)

 

 

 

 

 

 



BANKRUPTCY AND FAMILY LAW LEGISLATION AMENDMENT BILL 2004

 

OUTLINE

The Bankruptcy and Family Law Legislation Amendment Bill 2004 (the Bill) makes a number of significant changes to the Bankruptcy Act 1966 and the Family Law Act 1975 , implementing a number of key recommendations of the Joint Taskforce Report on the Use of Bankruptcy and Family Law Schemes to Avoid Payment of Tax (Joint Taskforce). 

These Government amendments insert new Schedule 5 in the Bill, amending the Family Law Act 1975 (the Family Law Act) in order to clarify the rights of third party creditors in family law property matters, and to require a separation declaration before certain binding financial agreements come into effect.

As with the existing provisions of the Bill, these amendments are part of the Government response to the Joint Taskforce recommendations.

The reason for the amendments is to consolidate all reforms relating to family law and bankruptcy law interaction in the one Bill.  The amendments were previously contained in Part 19 of the Family Law Amendment Bill 2004, which was introduced in the House of Representatives on 1 April 2004, and lapsed with the proroguing of Parliament during the 2004 election period. 

As part of the Family Law Amendment Bill 2004, the amendments were referred for inquiry to the Senate Legal and Constitutional Legislation Committee (the Senate Committee), which reported on 30 July 2004.  The amendments incorporate a change recommended by the Senate Committee, changing section 79F to ensure that the court is able to determine the circumstances in which third parties are to be notified of proceedings under Part VIII of the Family Law Act (which deals with financial matters).

FINANCIAL IMPACT STATEMENT

These Government amendments will have no financial impact.



NOTES ON CLAUSES

Clause 1 - Commencement

1.       Clause 1 of the Government amendments provides that the amendments in Schedule 5 will commence 28 days after the Bill receives Royal Assent.

Clause 2 - insertion of Schedule 5

2.       Clause 2 of the Government amendments inserts new Schedule 5 to the Bill.  Schedule 5 contains 5 items of amendments to the Family Law Act 1975 .

 

SCHEDULE 5 - ADDITIONAL AMENDMENTS RELATING TO THE INTERACTION BETWEEN FAMILY LAW AND BANKRUPTCY LAW

Item 1 - At the end of section 79

3.       Item 1 inserts new subsection 79(10) in the Act, allowing a creditor of a party to family law property proceedings, or any other person whose interests would be affected by an order in such proceedings, to apply to become a party to those proceedings.

Item 2 - At the end of section 79A

4.       Item 2 inserts subsection 79A(4) in the Act.  Section 79A sets out the circumstances in which the court can set aside a family property order.  This new subsection would clarify, for the purpose of section 79A, that a third party creditor has standing in family property proceedings as a person affected by a family property order if the creditor can show that he or she may be unable to recover his or her debt if such an order were made.

Item 3 - After section 79E

5.       Item 3 inserts new section 79F in the Act, to allow for Rules of Court to be made specifying the circumstances in which a party or a person applying for orders in family property or spousal maintenance proceedings may be required to notify a third party (for example, a creditor of a party) of those proceedings.   

Item 4 - After section 90D

6.       Item 4 inserts new section 90DA in Part VIIIA of the Act, dealing with binding financial agreements.  This amendment requires that, if parties make a financial agreement under the Act that deals with post-separation property or spousal maintenance arrangements, the agreement cannot come into effect until the parties also make a written separation declaration.  The declaration must state that the parties have separated, are living separately, and are unlikely to resume cohabitation.  The agreement will have no effect, to the extent that it deals with those arrangements, if the declaration is not made.

Item 5 - After subsection 106B(4)

7.       Item 5 inserts new subsection 106B(4AA) in the Act.  Section 106B allows the court to make an order to set aside or restrain a transaction that might defeat a claim or an interest in proceedings under the Act.  The amendment would clarify that an application can be made under section 106B by a party, or by a creditor of a party, or by a person whose interests would be affected by the transaction.