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Wednesday, 28 October 2009
Page: 11252

Mr PERRETT (3:05 PM) —Mr Speaker, my question is to the Attorney-General. What steps is the government taking to assist Australians in financial distress?

Mr McCLELLAND (Attorney-General) —I thank the member for Moreton for his question. The Australian economy has performed better than most in the face of the global recession, but unquestionably there are still a number of Australians doing it tough. As a result of the global recession, for instance, in the last financial year there was an 11 per cent increase in bankruptcies and this represented the highest ever level of personal insolvency activity. The figures show the vast majority of bankruptcies relate to consumer debts and people involved with relatively few assets and little income, rather than unscrupulous debtors trying to avoid paying their debts. In these circumstances, it is more important than ever that our system is fair for both debtors but also creditors, and specifically the government recognises that small businesses are also doing it tough and they are entitled to be paid and they are entitled to be paid on time. Essentially our goal is to achieve the right balance.

After extensive public consultation, this morning I introduced legislation to implement significant reforms to Australia’s personal bankruptcies laws. The bill introduces a number of reforms, including increasing the minimum amount for which a creditor can petition from $2,000 to $10,000—and I would add that this amount has not been increased since 1996. The proposed increase in the threshold will ensure that people are not bankrupted over relatively small debts and that bankruptcy is used as a last resort and not as a debt collection tool. I can indicate, for those who have expressed concern, that in the last financial year there were only 391 sequestration orders for an amount of less than $10,000. The vast majority were for a considerably larger amount than that.

I can indicate also that the government proposes to increase the stay period from when a declaration of intent to file a debtor’s petition is made. That will be increased from seven days to 28 days. The purpose is to give those in financial distress the opportunity to obtain advice and perhaps restructure their affairs, and it will also encourage creditors collectively to approach the debtor with a view to negotiating, perhaps, a debtor agreement. In that respect, the figures show that debt agreements provide for far more satisfactory outcomes all around. Last year, for instance, debt agreements returned an amount of about 60c in the dollar, as opposed to about 2c in respect of bankruptcies.

While we have strengthened the protections for those facing unmanageable debts, we have also imposed, on the other side of the equation, good-faith obligations on them. Specifically, the bill strengthens the penalties for some offences, particularly those involving fraud or wilful failure to disclose income and assets. Finally, there are, all too frequently, reports that fees of insolvency practitioners considerably exceed the value of the funds that are recovered from debtors. The government is therefore including additional measures to introduce proportionality and greater accountability in respect of professional fees.

These measures, we believe, strike an appropriate and fair balance and will achieve better outcomes for debtors and creditors. We also believe they will be beneficial in having a more effectively functioning economy generally.