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Legal and Constitutional Affairs Legislation Committee
Australian Financial Security Authority

Australian Financial Security Authority


CHAIR: Would you like to make an opening statement? Or are you happy to go straight to questions?

Mr McCormick : I'm happy to go straight to questions, thank you.

CHAIR: That was the right answer!

Senator KIM CARR: I want to go to the issue of insolvency reform. As I understand it, the government made some announcements concerning chapter 11 style insolvency laws to apply to small incorporated entities. While I appreciate that that's not directly your responsibility, I'm wondering whether you're being consulted before the announcements are made. Is this the first time you've been here?

Mr McCormick : It is, yes.

CHAIR: Welcome!

Senator KIM CARR: I don't mean you personally; I mean the agency. Is this the first time the agency's been here?

Mr McCormick : For a number of years, yes.

Senator KIM CARR: How many?

Mr McCormick : I think four or five.

Senator KIM CARR: Well, we'll have to make up for it on another occasion! I understand that Senator Stoker's kept us pretty busy this morning, so we'll have to make up for it another time. Can you just indicate to me whether or not you've been consulted in regard to those changes?

Mr McCormick : Yes, we were consulted through the Attorney-General's Department, where changes had an impact on the bankruptcy process.

Senator KIM CARR: Can you outline the restrictions on sole traders who have become bankrupt? What are the restrictions on their business activities, and how long would they be bankrupt for if these measures come forward?

Mr McCormick : Sorry—I think there may be a little bit of confusion. Maybe I could just clarify the question. Sole traders are unincorporated businesses, generally. So, they would not be subject to the corporate insolvency processes.

Senator KIM CARR: Alright. So, let me rephrase it. What impact do you understand the measures that are being proposed will have in terms of changes to the bankruptcy laws that would affect those incorporated entities?

Mr McCormick : Sorry, but that's really a question—

Senator KIM CARR: So, you can't assist us in that regard?

Mr McCormick : for the Treasury.

Senator KIM CARR: Do you think that for small businesses who are sole traders that are incorporated—is that a technical possibility?

Mr McCormick : Not that I'm aware of. Actually, no—I'm advised that no, you would be either incorporated or unincorporated.

Senator KIM CARR: So, they're not likely to be a sole trader under those circumstances, even if they are incorporated?

Mr McCormick : There are some incorporated small businesses—

Senator KIM CARR: Sole traders. Well, there we go—

Mr McCormick : I'm not sure if you'd call them a sole trader, sorry.

Senator KIM CARR: Well, since you haven't been here for a while, you're going to have to educate me, obviously. What is the intersection between your agency and these measures?

Mr McCormick : Frankly, there's very little intersection.

Senator KIM CARR: Right, very little. So, why were you consulted?

Mr McCormick : I think just to make sure that any of these new policy proposals didn't have an unintended impact on areas they just ask us to check off.

Senator KIM CARR: I presume you have some interest in insolvency reform, though?

Mr McCormick : In insolvency reform?

Senator KIM CARR: Yes.

Mr McCormick : In personal insolvency reform, yes, Senator. But can I just say that we're not responsible for the policy. That is the responsibility of the Attorney-General's Department. We administer the Bankruptcy Act and we administer the Personal Property Securities Act.

Senator KIM CARR: So, is it the case that the changes, as announced, would in fact reduce the period of bankruptcy from three years to one year?

Mr McCormick : No, I don't believe that is the case, Senator. I believe you may be—I was going to say confusing but I don't like to use that word necessarily.

Senator KIM CARR: No, you wouldn't want to use that word.

Mr McCormick : There was a separate issue where the government was considering a movement from—

Senator KIM CARR: Certainly that was the provision of the Bankruptcy Amendment (Enterprise Incentives) Bill, as my notes suggest to me.

Mr Anderson : Senator, if I could just say—

Senator KIM CARR: I understand, so you're going to get me out of trouble here, aren't you? Explain the differences between these various measures.

Mr Anderson : So, I'm going to say, Senator, that most of what you're asking about seems to be a matter for the Treasury portfolio who are responsible for corporate insolvency.

Senator KIM CARR: Mr Morrison's basically told us that he knows nothing about this stuff. Is that what you're saying?

Mr McCormick : About corporate insolvency?

Senator KIM CARR: No, with the particular announcement the government has made. This is not a matter that you have any responsibility for.

Mr McCormick : That is, I think, correct, yes.

Senator KIM CARR: That's what you're putting to me, isn't it? So, you won't be able to tell me whether or not the government is actually proceeding with the measure?

Mr McCormick : It would only be speculation on my part in what I've read—

Senator KIM CARR: Other than speculation—as an informed insider?

Mr McCormick : It's not part of my responsibility, so—

Senator KIM CARR: No.

Mr McCormick : I would refer you to the Treasury.

Senator KIM CARR: I think I best put that on notice, if that's the case. Thank you. The Bankruptcy Amendment (Enterprise Incentives) Bill 2017—you actually have some responsibilities under that provision, is that correct?

Mr McCormick : Yes.

Senator KIM CARR: Under that measure, there was a reduction in the period of bankruptcy—is that correct?

Mr McCormick : That bill—and, again, any questions about that former bill, because the bill has lapsed, as I understand, are really ones for the Attorney-General's Department.

Senator KIM CARR: We're going around in circles here, aren't we?

Mr Anderson : I can confirm that that bill lapsed when the parliament was last prorogued.

Senator KIM CARR: Yes, so it was prorogued. Are there any plans that you're aware of, Mr Anderson, to reinitiate that bill?

Mr Anderson : The government's still considering whether to reintroduce a measure like that.

Senator KIM CARR: And are there any crossovers between the measures contained in that bill and those that have been announced in late September?

Mr McCormick : The Treasury measure—I'm not aware of any, but I'm not aware of the Treasury measure.

Senator KIM CARR: We were told back in June, not 2019: 'The Assistant Minister to the Prime Minister Mr Morton advised that the Attorney-General's liaison officer advised that the advice received is current. We remain committed to the progress of the bill through the parliament and, prior to the election, the government's consultation with stakeholders on potential amendments to the bill. The process will continue following the re-election of the government and the bill be reintroduced to parliament at an appropriate time.' So you're not aware of what the appropriate time is?

Mr Anderson : I can say that this committee did an inquiry into that bill and raised a number of concerns about whether a one-year default period for bankruptcy would be sufficient in all circumstances. That's something that's still being considered. COVID has, of course, created a new set of circumstances which also require that the government thinks about how best to approach personal insolvency reform.

ACTING CHAIR ( Senator Kim Carr ): So we really can't take it any further than that?

Mr Anderson : I can't give you a date at the moment.

ACTING CHAIR: And you can't contradict the proposition I put to you that there's an intention to reintroduce the bill?

Mr Anderson : That's certainly my understanding, but it's if the government is considering to reintroduce it in the same form or to do something different.

ACTING CHAIR: In terms of the bankruptcy reform measures, what do you understand to be the current position before the government, given that you're responsible for bankruptcy issues?

Mr McCormick : Yes, but we're not responsible for the policy. So, again—


Mr McCormick : I think Mr Anderson has just explained to you about one particular policy issue that was at stake there.

ACTING CHAIR: Clearly, I'm going to need to put that on notice. Thank you very much and I'm sorry we can't provide you with a more enlightening topic. I'll leave it there, Chair—oh! I'm chairing! Thank you very much for your attendance here today.

Mr McCormick : Thank you very much.

ACTING CHAIR: May they always be this interesting for you!