House of Representatives

Explanatory Memorandum

(Circulated by authority of the Attorney-General, the Honourable Philip Ruddock MP)

Bankruptcy Legislation Amendment (Fees and Charges) Bill 2006

Readers' Guide

This Explanatory Memorandum is divided into three main sections: a general outline of the main provisions of the Bankruptcy Legislation Amendment (Fees and Charges) Bill 2005 (the Bill) (Section 1); a discussion of the main policy objectives that the Bill seeks to achieve (Section 2, commencing at page 4); and a detailed discussion of each provision of the Bill (Section 3, commencing at page 7).

Section 1 - General Outline

1. The amendments proposed by this Bill would enable the Minister to make legislative instruments to determine the fees and charges that are provided in the Bankruptcy Act 1966 (the Act), the Bankruptcy (Estate Charges) Act 1997 (the BECA) and the Bankruptcy (Registration Charges) Act 1997 (the BRCA). The Bill also contains minor technical amendments to enhance the operation of the Act and the BECA.

2. The objects of this Bill are principally to facilitate implementation by the Insolvency and Trustee Service Australia (ITSA) of cost recovery arrangements consistent with the Government's cost recovery policy. The Bill also contains minor technical amendments with the objective of enhancing the operation of the Act including facilitating the delivery of services electronically.

3. ITSA is committed to ongoing monitoring and periodic review of those fees and charges. Enabling the Minister to determine the fees and charges in a legislative instrument will allow greater flexibility to reflect stakeholders' concerns and the current costs of the personal insolvency services provided by ITSA. The Bill will empower the Minister to determine by legislative instrument, the following fees payable under the Act for personal insolvency services provided by ITSA:

a.

the fees payable as remuneration to the Official Trustee for acting as trustee, controlling trustee or administrator in any administration under the Act;

b.

the fees payable to the Official Receiver for exercising a power at the request of a trustee under the Act;

c.

the fees imposed on persons who are not creditors of a bankrupt or debtor for access to documents required to be filed by the Act;

d.

the fees payable for applying to be registered as a Registered Trustee, being registered as a Registered Trustee or obtaining an extension of the registration of a Registered Trustee;

e.

the fees relating to the National Personal Insolvency Index; and

f.

the rate at which realisations charge is payable.

4. Other proposed amendments which will enhance the delivery of personal insolvency services, include:

a.

changing the time for the payment by bankruptcy trustees of realisations charge and interest charge under the Bankruptcy (Estate Charges) Act 1997 from a twice yearly payment to an annual payment at the end of the financial year;

b.

amending the requirements under the Act relating to approved forms, in order to facilitate electronic service delivery;

c.

removing the requirement for dividends to be paid by cheque, in order to facilitate other payment options such as electronic funds transfers; and

d.

minor technical amendments to clarify the operation of the Act.

Financial Impact Statement

5. It is anticipated that the Bill will have positive net financial resource implications for the Government of approximately $6 million per annum.

6. The amendments will facilitate the implementation of cost recovery arrangements by ITSA. The expected effect of these cost recovery arrangements on ITSA's resourcing and administered revenues are as follows:

a.

Ongoing increased resourcing required for ITSA:

	Resourcing $m	Impact on fiscal balance $m	Impact on underlying cash balance $m
2005-06	+2.2	-2.2	-2.2
2006-07	+0.9	-0.5	-0.5
2007-08	+0.9	-0.5	-0.5
2008-09	+0.9	-0.5	-0.5

b.

Ongoing increased administered revenues generated by ITSA:

	Revenue $m	Impact on fiscal balance $m	Impact on underlying cash balance $m
2005-06	0.0	0.0	0.0
2006-07	+6.9	+6.9	+6.9
2007-08	+6.9	+6.9	+6.9
2008-09	+6.9	+6.9	+6.9

7. Implementation costs of $0.5 million and a capital injection of $1.7 million are required in 2005-06 to develop and implement the proposed new arrangements.

8. It is anticipated that additional ongoing costs of $0.9 million per annum will be incurred. This will be offset by an expected increase in revenue of $6.9 million.

Section 2 - Policy objectives

Minister's determination of fees and charges by legislative instrument

9. In order to ensure that ITSA's operations comply with the Government's cost recovery policy, any fees and charges that it imposes for the provision of services must reflect the actual costs to ITSA of providing those services.

ITSA is committed to ongoing monitoring and periodic review of the costs of providing personal insolvency services. It is intended that such reviews will occur biennially, unless significant changes in the costs of activities require earlier reviews. The current fees regime which sets fees and charges either in the Act itself or by regulation will not afford the flexibility to reflect stakeholders' concerns and the current costs of the services in the fees for ITSA's services. services. This will provide the responsiveness and flexibility required to enable effective and fair cost recovery for services supplied to stakeholders. The amendments will also facilitate the consolidation and reform of the system of fees and charges.

ITSA has already 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) has been prepared using the 'Commonwealth Cost Recovery Guidelines for Information and Regulatory Agencies' ('the Guidelines') issued by the Department of Finance and Administration in March 2003. Stakeholders have been extensively consulted as part of the cost recovery review and will be consulted as part of any future reviews of fees and charges.

Realisation and registration charges

10. Under ITSA's cost recovery arrangements, the realisations charge will be set at a level designed to recover the costs of the regulation of practitioners, investigation of bankruptcy fraud and administration of assetless estates. The rate at which the realisations charge will need to be set to recover the costs of those activities will be determined by the Minister by legislative instrument, consistent with the manner in which fees for the provision of other services are set. The Bill will amend the Bankruptcy (Estate Charges) Act 1997 (the BECA) to remove the regulation making power to set the rate at which realisations charge is payable and remove the default rate of 8%. There is no change to the existing policy that the realisations charge must not be higher than 15%.

11. The costs of processing applications for, and extending, the registration of persons wishing to be registered as trustees under the Act and changing the conditions that may be placed on their registration, are charges separately imposed under Bankruptcy (Registration Charges) Act 1997 (the BRCA). As the costs of application for registration and its extension, are able to be determined by reference to the actual costs of providing these registration services, these fees will properly be characterised as fees for service and not as taxes. The new fees will be determined by the Minister by legislative instrument as fees for those services. As for monitoring compliance with conditions placed upon the registration of Registered Trustees, together with any consequential variations and removals of those conditions, this role forms part of the ongoing monitoring and regulatory activities of ITSA. Therefore, the costs of these activities will be recovered through the imposition of the realisations charge.

Introduction of an annual charge period

12. Subsection 6(3) of the Bankruptcy (Estate Charges) Act 1997 requires trustees under the Act to remit realisations charge and interest charge payments after the end of each six month charge period. The Bill will amend that Act to provide for a single charge period aligned with the financial year. This will assist in enabling the reconciliation of the amount of charge payable with the amount actually paid. There will be a reduction in red tape for trustees, who currently are required to calculate and remit the charge twice yearly and separately submit an annual return detailing all estates they are administering. The amendment will allow for a single annual return accompanied by a single annual remittance of realisations and interest charges.

Amendments relating to approved forms

13. The Bill will amend the definition of and requirements under the Act relating to approved forms, in order to facilitate the development of electronic service delivery. In particular, the Bill will amend the Act by:

a.

altering the definition of an approved form in the Act to explicitly include an electronic form;

b.

removing the requirement in the Act for the gazettal of the form for a Statement of Affairs;

c.

removing the requirement in the Act that the debtor or bankrupt sign the declaration that the particulars in a Statement of Affairs are correct;

d.

removing the requirement in the Act for the verification by affidavit of both the Statement of Affairs under Part XI of the Act or the statement of a person's administration of a deceased person's estate; and

e.

removing the requirement in the Act for the signatures of the debtor and trustee on a section 188 authority to be witnessed.

14. The amendments are designed to ensure that the Act will facilitate ITSA's delivery of services electronically. This is consistent with the overall Government policy to ensure services are available electronically.

Dividends need not be paid by cheque

15. The Act currently requires that dividends must be paid to creditors by cheque. The removal of this requirement will enable the use of more efficient payment options, such as electronic funds transfers. Dividends may still be made by cheque.

Minor technical amendments

16. The Bill also introduces minor technical amendments to the Act to clarify or update existing provisions to enhance the operation of the Act and do not introduce any changes to policy.

Section 3 - Notes on sections

Section 1 - Short Title

17. The Bankruptcy Legislation Amendment (Fees and Charges) Bill 2006 (the Bill) proposes amendments to the Bankruptcy Act 1966 (the Act). By proposed section 1, when the Bill has been enacted, it will be known as the Bankruptcy Legislation Amendment (Fees and Charges) Act 2006.

Section 2 - Commencement

18. In accordance with the table in proposed section 2, proposed sections 1 to 3 and anything in the Bill not elsewhere covered in that table will commence on the day which the Bill receives Royal Assent. Proposed Schedule 1, Part 1 will commence on 1 July 2006. Proposed Schedule 1, Part 2 will commence on 1 July 2006 or upon the commencement of the Bankruptcy Legislation Amendment (Anti-avoidance) Act 2006, whichever is the later. However, the provision(s) in proposed Schedule 1, Part 2, are contingent on the commencement of Schedule 1 of the Bankruptcy Legislation Amendment (Anti-avoidance) Act 2006. Proposed Schedules 2 and 3 will commence on 1 July 2006. Proposed Schedule 4 will commence on the day on which the Bill receives the Royal Assent.

Section 3 - Amendments

19. Proposed section 3 is a drafting device to allow all the proposed amendments to be set out in a Schedule. The items in each Schedule will amend each specified Act and will have effect according to their terms. Notes on the Schedule items follow.

Schedule 1-Fees and Remuneration

Part 1 - Amendments commencing on 1 July 2006

Bankruptcy Act 1966

Item 1

20. This item proposes amendments to provisions of the Act which provide for a third party's access to statements of affairs filed in bankruptcies or accompanying debtors' petitions. The fees for access are prescribed by the Bankruptcy Regulations 1996 (the regulations). Amendments made by item 19 enable the Minister to make legislative instruments determining new fees, including the fees mentioned in these provisions. This item makes consequential amendments to these provisions to refer to the fee that is determined by the Minister's legislative instrument.

Items 2 to 10

21. Items 2 to 9 amend various provisions in the Act dealing with an individual's application to become registered, or to extend their registration, as a trustee under the Act. These amendments will replace provisions in the Bankruptcy (Registration Charges) Act 1997 (the BRCA) which is proposed to be repealed by the Bill. Paragraph 154A(3)(b) provides that the application must be accompanied by the charge imposed under section 4 of the BRCA. Under amendments made by item 19 which introduces new subsection 316(1)(a), that charge is a fee determined by the Minister by legislative instrument. Item 2 makes consequential amendments to paragraph 154A(3)(b) to refer to the fee that is determined by the Minister's legislative instrument. Item 3 provides that the new fee applies to applications (to become a trustee registered under the Act) made on or after 1 July 2006 under section 154A of the Act.

22. Subsection 155C(1) provides that an applicant must be registered as a trustee if the committee decides that the applicant should be registered and the applicant has paid the charge for registering a person as a trustee under the Act. That charge is imposed by section 5 of the BRCA. Under amendments made by item 19 which introduces new subsection 316(1)(a), that charge will be a fee determined by the Minister by legislative instrument. Item 4 makes consequential amendments to paragraph 155C(1)(b) to refer to the fee that is determined by the Minister's legislative instrument. Item 5 provides that the new fee applies to applications (to become a trustee registered under the Act) made on or after 1 July 2006 under section 154A of the Act.

23. Subsection 155D(1) provides for the extension of registration of a person as a trustee for three years from expiry of the person's registration and refers to the payment of a charge imposed by section 6 of the BRCA which provides for a charge for extending the term of registration. Under amendments made by item 19 which introduces new subsection 316(1)(a), that charge will be a fee determined by the Minister by legislative instrument. Items 6, 7 and 8 make consequential amendments to paragraph 155D(1)(b) and subsection 155D(3) to refer to the fee that is determined by the Minister by legislative instrument. Item 9 provides that the amendments made to section 155D by these items apply to extensions made under that section resulting from applications made on or after 1 July 2006.

24. Item 10 introduces new section 155K which deems that any payment of a fee under sections 154A, 155C or 155D given by cheque or payment order, is not taken to be paid until the amount of such cheque or payment order has been paid by the institution upon which it is drawn.

Items 11 to 13

25. Section 163 of the Act deals with the remuneration of the Official Trustee (OT). Subsection 163(1) provides that the OT is to be remunerated as prescribed by the Regulations. Amendments made by item 19 introduce new subsection 316(1)(c) which provides that the Minister may make legislative instruments determining the amounts of the remuneration of the OT. Items 11 and 12 make consequential amendments to subsection 163(1) and the note to subsection 163(2), to reflect that the OT's remuneration is determined by the Minister by legislative instrument.

26. Item 13 provides for the application of the amendments of section 163 of the Bankruptcy Act 1966 made by this Part. New subsection 163(1) and the note to subsection 163(2) applies to remuneration of the OT for work arising from any of the events listed in paragraphs (a) to (f) occurring on or after 1 July 2006. Those events are:

(a)

the making of a direction under section 50 of that Act;

(b)

a person becoming a bankrupt;

(c)

lodgment of a proposal for a composition or scheme of arrangement under section 73 of that Act;

(d)

the giving of a proposal for a debt agreement under section 185C of that Act;

(e)

signature of an authority under section 188 of that Act;

(f)

the making of an order for the Official Trustee to act as the trustee of the estate.

27. Therefore, item 13 makes provision to the effect that in relation to work arising under any of the above events that happens on or after 1 July 2006, the remuneration of the Official Trustee is provided by new subsection 163(1).

Items 14 to 15

28. Section 163A of the Act deals with the costs and expenses of the Official Receiver. Subsection 163A(2) provides that the fee for the exercise of an Official Receiver's power under the Act at the request of a trustee is prescribed by the regulations. Under amendments made by item 19 which introduces new subsection 316(1)(a), the new fee for the exercise of the Official Receiver's power under the Act will be set by the Minister by legislative instrument. Item 14 proposes an amendment to subsection 163A(2) to refer to the change in fee making power and in doing so, corrects a typographical error.

29. Item 15 proposes that the new fee will apply to requests of a trustee made on or after 1 July 2006.

Item 16

30. Sections 188B and 226 of Part X of the Act provide for access, by a person who is not the debtor nor a creditor of the debtor, to documents required to be filed by Part X of the Act on payment of a fee prescribed by the regulations. Subsections 188B(3), 226(3) and (4) provide for the third party's access respectively, to the Statement of Affairs or personal insolvency agreement or other documents filed with the Official Receiver.

31. Section 246 of the Act deals with the Statement of Affairs of the deceased person whose estate is being administered under Part XI of the Act. Subsection 246(5) provides for access to the Statement by a third party on payment of a fee prescribed by the regulations.

32. Under amendments made by item 19 which introduces new subsection 316(1)(a), the new fee for a third party's access to documents under subsections 188B(3), 226(3) and (4) and 246(5) will be determined by the Minister by legislative instrument. Item 16 proposes consequential amendments to those provisions to reflect the change in the fee making power.

Items 17 and 18

33. Subsection 315(2)(j) of the Act provides that the regulations may provide for the charging and payment of fees in relation to the matters set out in subparagraphs (i) to (v). Item 17 proposes to insert necessary words to ensure that the regulation making power in paragraph 315(2)(j) does not extend to setting the amounts of fees, other than the fees mentioned in paragraph 81(17)(b). That paragraph is an exception because it deals with the notes of an examination of the relevant person before the court or registrar. Because those fees are not set by ITSA they will need to be set by the regulations.

34. Item 18 proposes amendments to clarify the effect of the amendment made by item 17 on regulations that were effective just before 1 July 2006 and were made for the purposes of paragraph 315(2)(j) relating to the charging or payment of fees. Items 18(2) and (3) make provision to the effect that the amendment made by item 17 to paragraph 315(2)(j) affect those existing regulations only in so far as they provide for the setting of amounts of fees and not in so far as they provide for other aspects of the charging and payment of fees.

35. Therefore, although the amount of fees will be determined by the Minister by legislative instrument, all other aspects of charging and payment of fees will continue to be dealt with by regulations. For example, the regulations may provide for the Inspector-General to make alternative arrangements for the payment of those fees.

Item 19

36. Item 19 proposes to insert new subsection 316(1) which will enable the Minister to determine the following fees and remuneration set out in paragraphs (a), (b) and (c), that were previously set by the Regulations.

37. New paragraph 316(1) enables the Minister by legislative instrument to determine the amounts of one or more of the following:

(a)

fees payable for access by third parties to a Statements of Affairs filed in bankruptcies, debtor's petitions and documents filed under Part X, and of the statements filed in Part XI administrations, for applying to be registered as a Registered Trustee, being registered as a Registered Trustee or obtaining an extension of the registration of a Registered Trustee, and for the Official Receiver's exercise of a power under the Act;

(b)

other fees relating to one or more of the following:

(i)

proceedings under this Act;

(ii)

inspection of material entered in the National Personal Insolvency Index;

(iii)

obtaining extracts of material entered in the National Personal Insolvency Index;

(iv)

inspection and copying of documents given to Official Receivers;

(v)

the making of other requests or applications under this Act or the presentation or lodgment of other documents under this Act.

(c)

remuneration of the Official Trustee.

38. The new fees will represent the costs of providing the services for which they relate. Therefore, new subsection 316(2) provides that the fees determined must not be such as to amount to taxation.

Part 2 - Amendments with contingent commencement

Bankruptcy Act 1966

Items 20 and 21

39. The Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005 was introduced in December 2005. The Bill intends to strengthen the 'claw back' provisions in the Act by extending the use of transcripts and notes, obtained from the Official Receiver's examinations under section 77C to obtain information and evidence, in proceedings under the Act, regardless of whether the person examined is a party to the proceedings. Item 1 of that Bill proposes to include new subsection 77C(3)(b)(iii) which will provide that the transcripts and notes are available for inspection to a third party on payment of the fee prescribed by the Regulations.

40. Under amendments made by item 19 which introduces new subsection 316(1)(a), the new fee for the exercise of the Official Receiver's power under the Act will be set by the Minister by legislative instrument. Item 20 proposes amendments to subparagraph 77C(3)(b)(iii) to reflect the change in fee making power.

41. Item 21 proposes to include the new fee set out in subparagraph 77C(3)(b)(iii) to the fees in new paragraph 316(1)(a) that the Minister is empowered to determine.

42. These items will commence on 1 July 2006 or upon the commencement of the Bankruptcy Legislation Amendment (Anti-avoidance) Act 2006, whichever is the later. The commencement of these items is conditional upon the commencement of that Act, as they relate to a right to inspect documents that is created by that Act.

Schedule 2-Estate Charges

Bankruptcy (Estate Charges) Act 1997

Items 1 to 3

43. The Bankruptcy (Estate Charges) Act 1997 (the BECA) imposes an interest charge and a realisations charge on trustees in sections 5 and 6, respectively. Those charges are payable within 35 days after the end of the charge period. Subsection 4(1) of the BECA defines 'charge period' to mean a period of 6 months commencing on 1 January or 1 July. Item 1 proposes to amend the definition of 'charge period' to mean 'financial year'. The new definition will reduce twice yearly payments to an annual payment.

44. As a result of these amendments, under subsection 5(4) of the BECA, the interest charge will be payable within 35 days after the end of the financial year in which the interest is paid. Similarly, under subsection 6(3), a realisations charge will be payable within 35 days after the end of the financial year.

45. Subsection 7(1) of the BECA provides that the amount of charge payable is 8% of the amount on which charge is payable for the period or a different rate prescribed by the Regulations. Subsection 7(2) provides that the regulations which may prescribe the rate must not be higher than 15%.

46. Item 2 proposes new section 7 which enables the Minister by legislative instrument to determine the amount of charge payable for a charge period and that the percentage determined must not exceed 15%.

47. Item 3 proposes that the amendments proposed in items 1 to 3, will apply in relation to the financial years commencing 1 July 2006 and later financial years.

Schedule 3-Repeal of the Bankruptcy (Registration Charges) Act 1997

Part 1 - Repeal

Bankruptcy (Registration Charges) Act 1997

48. Items 1 and 2 propose amendments dealing with the repeal of the Bankruptcy (Registration Charges) Act 1997 (the BRCA). This is because the charges provided in the BRCA have been included in the fees to be determined by the Minister by legislative instrument in new subsection 316(1)(a).

49. Item 1 proposes the repeal of the whole of the BRCA.

50. Item 2 proposes application provisions made necessary by the repeal of the BRCA. The repeal of section 4 dealing with the fees for applications for registration, will apply to applications made on or after 1 July 2006. The repeal of sections 5 and 6 of the BRCA dealing respectively with the fees for providing registration and for extending registrations, will apply to registrations or extensions resulting from applications made on or after 1 July 2006.

Part 2 - Consequential provisions

Bankruptcy Act 1966

51. Items 3 and 4 propose amendments dealing with the charge imposed by section 7 of the BRCA to change the conditions of registration, which is to be repealed.

52. Conditions may be placed upon the registration of a trustee registered under the Act, either on their initial registration or as a result of a decision of a disciplinary committee formed under section 155H of the Act. Such conditions may be varied or removed by a committee formed under section 155E of the Act, or upon the application of the practitioner subject to the conditions. An application for changing the conditions of registration must be accompanied by any information or documents prescribed by the regulations and the charge imposed by section 7 of the BRCA.

53. The role of monitoring compliance with conditions placed upon the registration of Registered Trustees, together with any consequential variations and removals of those conditions as circumstances require, forms part of the ongoing monitoring and regulatory role of ITSA. The costs of these activities are recovered through the imposition of the realisations charge.

54. Therefore the imposition of a separate charge imposed by section 7 of the BRCA to change the conditions of registration, is not necessary or appropriate. Item 3 proposes that new subsection 155E(3) requires that the application be accompanied only by any information or documents prescribed by the regulations.

55. Item 4(1) proposes transitional arrangements of regulations that were in force for the purposes of paragraph 155E(3)(a) of the Act which requires that applications be accompanied by information or documents prescribed by the regulations. Those existing regulations will continue to have effect as if they were made for the purposes of new paragraph 155E(3). Item 4(2) proposes that the amendment made by item 4 does not prevent the amendment or repeal of those existing regulations by regulations made under the Act.

56. Items 5 to 9 propose amendments to Part XV of the Act which deals with provisions relating to the Bankruptcy Charges Acts. The amendments are consequential to the repeal of the BRCA.

57. Item 5 proposes a new heading at Part XV: Part XV-Provisions relating to the Bankruptcy (Estate Charges) Act 1997.

58. Items 6 and 7 repeal the definitions of 'registration charge' and 'Registration Charges Act' at section 278, respectively.

59. Item 8 proposes an amendment to omit the reference to 'and the Registration Charges Act' at subsections 279(1) and (2).

60. Item 9 proposes an amendment to omit the reference to 'registration charge' in subsection 285(1).

Schedule 4-Minor and technical amendments

Bankruptcy Act 1966

Items 1 to 3

61. Items 1 to 3 propose amendments to facilitate the delivery of services electronically. Item 1 proposes the amendment of the definition of 'approved form' in subsection 5(1) to include an electronic form as a form approved by the Inspector-General.

62. Items 2 and 3 deal with amendments to subsection 6A(2) which provides for the form and content of a Statement of Affairs used for purposes other than administrations of deceased persons under Part XI of the Act. Item 2 proposes the removal in paragraph 6A(2)(a) of the requirement for the gazettal of the form of Statement of Affairs and substituting a new paragraph 6A(2)(a) which leaves the requirement that the Statement is to be in an approved form.

63. Paragraph 6A(2)(c) provides that the Statement of Affairs contain a declaration, signed by the debtor or bankrupt, that the particulars are correct. Item 3 proposes an amendment to omit the words 'signed by the debtor or bankrupt' in paragraph 6A(2)(c). The Electronic Transactions Act 1999 (the ETA) provides a means for a person to meet a requirement to sign a document given to the Commonwealth by alternative means. This amendment is necessary to remove any doubt that the provisions of the Bankruptcy Act override the application of the ETA.

Item 4

64. This item proposes corresponding amendments made by items 2 and 3 above to a Statement of Affairs used under Part XI of the Act and a statement of a person's administration of the estate of a deceased person. Requirements for those statements are set out in subsections 6B(2). New subsection 6B(2) removes the requirements for the Statement of Affairs and a statement of a person's administration of the estate of a deceased person, to be gazetted and removes the requirement for such forms to be verified by affidavit.

Items 5 and 6

65. These items propose to add an additional note at the end of subsection 58(1) of the Act. Item 5 proposes a drafting device to include an additional note after the note at the end of subsection 58(1). Item 6 inserts new note 2 which indicates that even if property has vested under this section, the property may, under the Proceeds of Crime Act 2002 become subject to orders made under that Act. New note 2 does not represent any change in the law.

Items 7 and 8

66. Section 77C allows the Official Receiver, at the request of the trustee, to issue a notice to a person requiring them to provide information and attend before the Official Receiver to give evidence and produce books. The use of 'and' between paragraphs (a) and (b) of the section suggests that a notice must require the person to provide information AND attend an examination. In practice, it is not usual for the Official Receiver to do both and notices are issued requiring the person to provide information OR attend an examination OR both. Items 7 and 8 deal with new section 77C which better reflects the practice of the Official Receiver.

67. Item 7 proposes an amendment to subsection 77C(1) to enable the Official Receiver to require a person by written notice, to do one or both of the following matters set out in paragraphs (a) and (b). New paragraph 77C(1)(a) requires the person to give information to the Official Receiver for the purposes of the performance of the functions of Official Receiver or a trustee under the Act.

68. New paragraph 77C(1)(b) requires the person to attend before the Official Receiver or an authorised officer. In addition, a notice issued under paragraph 77C(1)(b) may require the person to do one or both of the following matters set out in subparagraphs (i) and (ii). New 77C(1)(b)(i) requires the person to give evidence relating to any matters connected to the performance of the Official Receiver's functions. New 77C(1)(b)(ii) requires the person to produce all books in their possession relating to any matters connected to the performance of the Official Receiver's functions.

69. The persons to whom the notice may be given under new subsection 77C, are unchanged. It does not matter whether or not the person is a bankrupt, or is employed in or in connection with a Department, or an authority, of the Commonwealth or of a State or Territory.

70. Item 8 provides for the saving of subsection 77C(1). The repeal and substitution of that provision made by this Schedule does not affect a requirement under that subsection involving a notice given before the repeal or an authorisation of an officer to exercise powers under paragraph 77C(1)(b) that was given before the repeal.

Item 9

71. Formerly, applications to vary a bankrupt's income contributions on the grounds of hardship were made to the Official Receiver. The Bankruptcy Legislation Amendment Act 2002 changed the position and made such applications to the trustee. However, paragraph 139ZG(2)(a) retains the outdated reference to the Official Receiver. This item proposes to update the reference to the 'Official Receiver' in that paragraph to 'trustee'.

Item 10

72. This item proposes to remove the requirement for a dividend to creditors to be made by cheque. This will facilitate more efficient payments options, such as payments by electronic funds transfers.

Items 11 and 12

73. Items 11 and 12 propose amendments to remove the requirement in the Act for the signatures of the debtor and the controlling trustee on an authority provided under subsection 188(2)(b), to be witnessed. That requirement does not affect the validity of the authority and item 12 proposes to repeal paragraph 188(2)(b).

74. Item 11 is a drafting device to indicate that paragraph 188(2)(aa) is the final paragraph in subsection 188(2)(2) consequential to the amendment made by item 12 which proposes the repeal of paragraph 188(2)(b).

Item 13

75. Item 13 proposes an amendment to subsection 267B(1) to omit the reference to paragraph 77C(1)(a) and substitute the reference to subsection 77C(1). Subsection 267B is an offence provision dealing with failure to comply with a notice issued under certain provisions of the Act, including the notice issued by the Official Receiver under paragraph 77C(1)(a). The amendment is necessary to ensure that failure to comply with all the notices that may be issued by the Official Receiver under subsection 77C(1) and not just the notice issued under paragraph 77C(1)(a), is caught by subsection 267B(1).