EXPLANATORY STATEMENT
Issued by the Authority of the Attorney-General
Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2006
Background
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2006 implements cost recovery arrangements for the provision of personal insolvency services by the Insolvency and Trustee Service Australia (ITSA) consistent with the Government’s cost recovery policy.
The Bankruptcy (Estate Charges) Act 1997 (the BECA) provides for a realisations charge to be imposed in respect of amounts received by a person acting as a trustee or controlling trustee under the Bankruptcy Act 1966.
Under ITSA’s cost recovery arrangements, the realisations charge is set at a level designed to recover the costs of the regulation of practitioners, investigation of bankruptcy fraud and administration of assetless estates. Therefore the realisations charge is set at a level designed to recover the costs of ITSA providing those services. The interest charge which is also imposed by the BECA offsets some of those costs. The level of the charge has been determined based on the average amount of realisations in bankruptcies and personal insolvency agreements administered under the Bankruptcy Act.
To assist in ensuring that debt agreements continue to be available as a viable alternative to bankruptcy for many debtors, the realisations charge will not be applied to money received in debt agreements.
The level of the charge will be reviewed on a biennial basis so that it reflects the costs of providing the services to the community. There will be no change to the existing policy that the realisations charge must not be higher than 15%.
Purpose
Former subsection 7(1) of the BECA provided for the amount of charge payable as a percentage of the amount on which the charge is payable. That charge was formerly 8% of the amount on which charge is payable for the period.
The Bankruptcy Legislation Amendment (Fees and Charges) Act 2006 inserted new section 7 of the BECA. Subsection 7(1) of that Act provides that the amount of charge payable for a charge period is the percentage, determined by the Minister by legislative instrument, of the amount on which charge is payable for the period. Subsection 7(2) of that Act provides for the Minister to make a legislative instrument determining the amount of charge payable for a charge period.
For the purposes of subsection 7(2) of the BECA, the Minister has determined that the percentage is 6%.
The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Operation
The Determination commences on 1 July 2006. The new percentage determined by this instrument applies to the amount of charge payable in relation to the financial year starting 1 July 2006.
Nature of Consultation
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.
Notes on clauses
Clause 1—Name of Determination
This clause provides that the determination is the Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2006.
Clause 2—Commencement
This clause provides for the commencement of the Determination on 1 July 2006.
Clause 3—Definition
This clause provides that in this Determination, the reference to the ‘Act’ means the Bankruptcy (Estate Charges) Act 1997.
Clause 4—Amount of charge payable
This clause provides that for subsection 7(1) of the Act, the determined percentage is 6%.