Explanatory Statement

Issued by the Authority of the Attorney General

EXPLANATORY STATEMENT

Bankruptcy Act 1966

Section 315 of the Bankruptcy Act 1966 (the Act) provides, in part, 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, including the fees payable to the Official Receiver and the remuneration of the Official Trustee.

The Bankruptcy Legislation Amendment (Fees and Charges) Act 2006 amended subsection 315(2) to enable the portfolio Minister to determine the fee and remuneration amounts and introduced subsection 316(1) to the Act. Subsection 316(1) provides for the Attorney-General to make legislative instruments determining the amounts of the Official Receiver's and other fees, and the Official Trustee's remuneration payable under the Act. Enabling the Attorney-General to determine the fees, remuneration and charges in legislative instruments will allow greater flexibility to reflect stakeholders' concerns and the current costs of the personal insolvency services provided by the Government.

Purpose and operation

The purpose of these Regulations is to make amendments to the Bankruptcy Regulations 1996 to reflect that the amounts of the Official Receiver's and other fees, and the Official Trustee's remuneration payable under the Act, are set by the Attorney-General's legislative instrument. The Bankruptcy (Fees and Remuneration) Determination 2006 (the 2006 Fees Determination) commences on 1 July 2006.

The Regulations:

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make consequential changes to reflect that the Official Receiver's and other fees, and the Official Trustee's remuneration payable under the Act, are set by the 2006 Fees Determination;

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clarify provisions relating to remunerating the Official Trustee or payment of fees to the Official Receiver; and

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streamline access and fee arrangements relating to the National Personal Insolvency Index.

The Regulations would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations would commence on 1 July 2006.

Details of the Regulations are provided in the Attachment.

Nature of Consultation

The Insolvency and Trustee Service Australia (ITSA), an Executive Agency in the Attorney-General's portfolio, administers and regulates Australia's personal insolvency system. ITSA has completed a review of its activities to determine those which should be charged for, the type of fee to apply, who should pay those fees and those activities which would more appropriately be funded through general taxation. A Cost Recovery Impact Statement (CRIS) was prepared using the 'Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies' issued by the Department of Finance and Administration in March 2003.

Stakeholders have been promptly and extensively consulted as part of the cost recovery review. In late 2004, information sessions on other legislative reforms foreshadowed ITSA's cost recovery policies and consultations specifically on cost recovery have since continued. Stakeholders will be consulted as part of any future reviews of fees and charges.

In addition, the Bankruptcy Reform Consultative Forum has been consulted on the cost recovery arrangements and the Cost Recovery Reference Group was formed specifically to provide ongoing advice and assistance in setting the amount of the fees and charges. The Forum comprises representatives from the Finance Industry, Financial Counselling Services, Banking sector, Government, the Law Council and the Insolvency Practitioners Association of Australia. The Cost Recovery Reference Group includes a debt agreement administrator.

ATTACHMENT

Details of the Bankruptcy Amendment Regulations 2006 (No. 2)

Regulation 1 - Name of Regulations

This regulation provides that the title of the Regulations is the Bankruptcy Amendment Regulations 2006 (No. 2).

Regulation 2 - Commencement

This regulation provides for the Regulations to commence on 1 July 2006.

Regulation 3 - Amendment of Bankruptcy Regulations 1996

This regulation provides that Schedule 1 to the Regulations amends the Bankruptcy Regulations 1996 (the Principal Regulations).

Schedule 1 Amendments

Item [1] Subregulation 1.03 (1), before definition of Act

This item inserts the definition of '2006 Fees Determination' which means the Bankruptcy (Fees and Remuneration) Determination 2006 made under subsection 316(1) of the Act. That Determination commences on 1 July 2006.

Item [2] Regulation 4.02A, at the foot

This item inserts a note to refer readers to the new fee that is payable under the 2006 Fees Determination if paragraph 4.02A(b) applies. That paragraph provides for the Official Receiver's extension of the period of service of a bankruptcy notice.

Item [3] Regulation 4.17, note

This item amends the note to refer to the fee payable for inspecting and copying the composition or scheme of arrangement as being set by the 2006 Fees Determination.

Item [4] Regulation 13.06

This item inserts new regulation 13.06 dealing with inspection of the National Personal Insolvency Index which provides a public record of information relating to personal insolvencies. The new regulation incorporates existing policy under former regulations 13.06 and 13.11 which provided different forms of access to the Index and refers to the fees now payable under the 2006 Fees Determination.

Formerly, regulation 13.06 dealt with a person's access to the Index on payment of a prescribed fee including providing alternative forms of access and payment methods. Access to the Index was subject to regulation 13.09 which provided that the Inspector-General has control of access to the Index. New subregulations 13.06(1) to (4) do not change existing policy in former regulation 13.06, other than to refer to the fees that are now set in the 2006 Fees Determination.

Former regulation 13.11 enabled the Inspector-General to provide a subset of information from the Index and to specify conditions on the use of that information. Existing policy in regulation 13.11 is reflected in new subregulations 13.06(3) and 13.06(5). In addition, new subregulation 13.06(3) provides that the fee payable for access granted by the Inspector-General is set by the 2006 Fees Determination.

Item [5] Regulations 13.11 and 15A.06

This item omits regulation 13.11 which has been incorporated into new regulation 13.06. This item also omits regulation 15A.06 which deals with a requirement previously imposed by regulation 16.14 which is now omitted.

Item [6] Part 16, Division 2, heading

This item inserts a new heading 'Division 2 Matters relevant to fees' and provides a note to inform readers that Divisions 2 and 3 of Part 16 of the Regulations formerly provided for the fees in relation to the Act (including the Official Trustee's remuneration) and that as a result of the amendment of the Act by the Bankruptcy Legislation Amendment (Fees and Charges) Act 2006, the remuneration of the Official Trustee and fees in relation to the Act are now set out in the 2006 Fees Determination.

Item [7] Part 16, Subdivisions 2.1, 2.2 and 2.3

This item substitutes a new subheading 'Part 16, Subdivisions 2.1, 2.2 and 2.3' which consists of regulations 16.06, 16.07, 16.08 and 16.09. The new regulations deal with payment of the Official Receiver's fees, transcript fees and the Official Trustee's entitlement to interim fees and reimbursement for expenses.

16.06 Payment of fees

New regulation 16.06 provides that if a fee is payable for the making of a request or an application to, or the presentation or lodgement of a document, with an Official Receiver, the request, application or document must not be dealt with unless the fee has been paid. There is no change to existing policy which was provided in former regulation 16.06. The new regulation 16.06 refers to the fees now set by the 2006 Fees Determination.

16.07 Official Trustee's entitlement to interim remuneration

New regulation 16.07 restates the Official Trustee's entitlement to interim remuneration by reference to the provisions in the 2006 Fees Determination which provides remuneration for the different types of work performed.

New subregulation 16.07(1) provides for the Official Trustee's entitlement to remuneration when work is performed in different types of administrations under the 2006 Fees Determination.

Paragraph 16.07(1)(a), (b) or (d) refer to the different types of work where remuneration provided in the 2006 Fees Determination is calculated at an hourly rate or is 20% of the value of the debt agreement, personal insolvency agreement or composition or scheme of arrangement accepted by creditors. New subregulation 16.07(2) provides that for those types of administrations, remuneration is payable to the Official Trustee in respect of an amount received by the Official Trustee when the amount is received and at the rate applicable when the amount is received.

Paragraph 16.07(1)(c) refers to work described in the 2006 Fees Determination in which the Official Trustee performs work in relation to the bankrupt estate or administration of the estate of a deceased person under Part XI of the Act. The Official Trustee's remuneration is calculated using the realised balance formula provided in the 2006 Fees Determination. New subregulation 16.07(3) provides that remuneration is payable to the Official Trustee from time to time as the funds are realised and at the rate applicable when the funds are realised.

16.08 Reimbursement of Official Trustee for expenses

New regulation 16.08 restates the common law that a trustee is entitled to be reimbursed expenses for work performed in relation to the administration of the estate by reference to the different types of work provided in the 2006 Fees Determination.

16.09 Fees - notes and transcript of evidence

New regulation 16.09 provides a fee for the purposes of paragraph 81(17)(b) of the Act which relates to notes taken in an examination of a person conducted under section 81 of the Act.

Item [8] Part 16, Subdivision 2.4, heading

This item omits the heading as a consequence of earlier drafting changes.

Item [9] Regulation 16.13A

This item renumbers regulation 16.13A as new regulation 16.11 as a consequence of earlier drafting changes.

Item [10] Subregulation 16.13A (5)

This item substitutes new subregulation 16.13A(5) which provides a new definition of 'fee' for the purposes of this regulation. The new definition refers to the fees that are able to be waived or remitted by the Inspector-General under new regulation 16.11 by reference to the 2006 Fees Determination. There is no change to existing policy. Those fees are set out in:

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paragraph 16.13A(5)(a) which refers to the fee payable under new regulation 16.09.

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paragraph 16.13A(5)(b) which refers to items 1, 2, 3, 4, 9, 11, 12 or 13 of the table following subclause 2.01(1) of the 2006 Fees Determination; or

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paragraph 16.13A(5)(c) which refers to subclause 2.01(2) which provides the fee for making copies or taking extracts of a document mentioned in items 1, 2, 3, 4, 11, 12 or 13 of the table mentioned above; or

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paragraph 16.13A(5)(d) which refers to clauses 2.02, 2.07 or 2.08 of the 2006 Fees Determination.

Item [11] Regulation 16.13B, except the note

This item substitutes new regulation 16.12 which provides review by the Administrative Appeals Tribunal of the Inspector-General's decisions made under new subregulation 16.11(1), to refuse to waive or remit the whole or part of a fee.

Item [12] Part 16, Division 3

This item omits this Division which primarily contained provisions which are spent because they refer to bankruptcies or other administrations that have been finalised.

Item [13] Schedule 2, item 11A

This item substitutes new subsection 64ZC(5A) into item 11A of Schedule 2. That Schedule makes modifications under section 76A of the Act which applies the meetings procedures set out in Division 5, Part IV of the Act for the purposes of meetings held in post bankruptcy arrangements with creditors under Division 6, Part IV of the Act.

Former subsection 64ZC(5A) of this Schedule required both the proxy appointed under the instrument and the creditor to disclose whether they had received or would receive a financial incentive relating to the proxy's voting in a particular way. To address the mischief of proxy purchasing, it is unnecessary that the proxy disclose whether they received or would receive a financial incentive to vote in a particular way.

New subsection 64ZC(5A) will result in only the creditor being required to disclose having received or that they will receive a financial incentive to appoint the proxy or to direct the proxy to vote in a particular way.

Item [14] Schedule 3, clause 1

This item omits a reference to a spent provision which was omitted by item 12 and inserts the reference to the Bankruptcy (Estate Charges) Act 1997 which is the relevant Act that imposes the realisations charge.

Item [15] Schedule 3, clause 1A

Schedule 3 provides the order of payment of first priority debts for the purposes of paragraph 109(1)(a) of the Act. Clause 1A of that Schedule provides for the priority of the Official Trustee's remuneration and reimbursement as priority debts when there has been a transfer of the administration of the bankruptcy to a registered trustee. This item makes consequential changes to refer to the Official Trustee's remuneration and reimbursement now provided respectively in the 2006 Fees Determination and new regulation 16.08.

Item [16] Schedule 6, Part 2, item 15

This item substitutes new item 15 into Part 2, Schedule 6 which provides modifications of the meetings procedures in Division 5 of Part IV of the Act as they apply to meetings held under Part X of the Act. New item 15 provides for new subsection 64ZC(5A).

Former subsection 64ZC(5A) of this Schedule required both the proxy appointed under the instrument and the creditor to disclose whether they had received or would receive a financial incentive relating to the proxy's voting in a particular way. To address the mischief of proxy purchasing, it is unnecessary that the proxy disclose whether they received or would receive a financial incentive to vote in a particular way.

New subsection 64ZC(5A) will result in only the creditor being required to disclose having received or that they will receive a financial incentive to appoint the proxy or to direct the proxy to vote in a particular way.

Item [17] Schedule 9

Formerly the fees specified in Schedule 9 were payable for the matters set out in that Schedule. This item omits Schedule 9 because the matters are now contained in the 2006 Fees Determination.