EXPLANATORY STATEMENT
Issued by the authority of the Attorney-General
Bankruptcy (Estate Charges) Act 1997
Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2010
Statutory basis
Subsection 7(2) of the Bankruptcy (Estate Charges) Act 1997 (the Act) provides that the Minister may make a legislative instrument determining the percentage payable as the Realisations Charge on amounts received by trustees, controlling trustees and debt agreement administrators.
Purpose
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2010 (the Determination) replaces the Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2007.
The Determination increases the Realisations Charge from 3.5% to 4%.
Background
The Realisations Charge is set at a level which recovers the cost of ITSA’s regulation and enforcement services. As it is based on expected realisations in bankruptcy, debt agreements and personal insolvency agreements but still needs to recover the cost of providing the relevant services, it is expected that the rate of the charge may change over time. The rate would move with the changing value of property and income realised in all administrations and is particularly susceptible to changes in the value of real property.
Prior to 2006, the rate of the charge was 8% — this was not determined by reference to cost recovery principles. At the time, it did not extend to amounts paid through the debt agreement system. In 2006, following ITSA’s initial cost recovery review, the rate was lowered to 6% to reflect the actual cost of providing the relevant services. In 2007, following the introduction of amendments to improve the operation of debt agreements, the charge was applied for the first time to money paid through the debt agreement system. On that basis, the rate of the charge was lowered to 3.5%.
The proposed increase to 4% is based on expected realisations in bankruptcy, debt agreements and personal insolvency agreements over the next two years. This forecast takes into account average realisations over the past two years.
Commencement
The Determination commences on 1 July 2010.
Consultation
The Determination has been prepared in consultation with ITSA. The proposed change was provided to the Bankruptcy Reform Consultative Forum, which operates as ITSA’s Cost Recovery Reference Group, for comment in March 2010. This ensures transparency in setting ITSA’s fees and charges.
Details of the fee changes
Realisations charge (Clause 5)
The amount payable is increased from 3.5% to 4%.