Revised Explanatory Memorandum
(Circulated by authority of the Attorney-General, the Honourable Philip Ruddock MP)Schedule 4 - Amendments relating to financial agreements under the Family Law Act 1975
Item 1: At the end of subsection 40(1)
Item 1 proposes to insert a new act of bankruptcy, in paragraph 40(1)(o) of the Bankruptcy Act 1966 (the Bankruptcy Act), to apply where a person is rendered insolvent as a result of assets being transferred pursuant to a financial agreement under Part VIIIA of the Family Law Act 1975 (the Family Law Act).
The new act of bankruptcy will apply only where the transfer under the financial agreement has the effect of rendering the person insolvent. This would apply only to transfers pursuant to financial agreements and not to other property distributions (for example, property settlements under section 79 of the Family Law Act).
Subsection 115(1) of the Bankruptcy Act provides that the bankruptcy of a person shall relate back to, and be deemed to have commenced at, the time of the commission of the earliest act of bankruptcy within a period of six months before the presentation of the petition leading to the person's bankruptcy. This amendment will allow the trustee to claim the property transferred pursuant to the financial agreement as divisible property in the estate.
Item 2: After subsection 40(7)
Item 2 proposes to insert new subsection 40(7A) which makes it clear that, for the purposes of paragraph 40(1)(o), a transfer of property includes a payment of money and that a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to that other person.
Item 3: Application of amendments
Item 3 provides that the amendments made by this Schedule apply in relation to financial agreements entered into after the commencement of this amendment.