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%.
Overview
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2010, issued under the authority of the Attorney-General, serves to amend the percentage payable as the Realisations Charge on amounts received by trustees, controlling trustees, and debt agreement administrators as stipulated in subsection 7(2) of the Bankruptcy (Estate Charges) Act 1997. This determination was enacted by the Australian government to ensure the charge reflects the actual cost of providing the relevant services, thereby maintaining the efficiency and sustainability of the administration of bankruptcy, debt agreements, and personal insolvency agreements. The increase in the Realisations Charge from 3.5% to 4% aims to recover the costs of the Insolvency and Trustee Service Australia's regulation and enforcement services, taking into account the changing value of property and income realised in all administrations. The Determination commenced on 1 July 2010 and was prepared in consultation with the Insolvency and Trustee Service Australia, ensuring transparency in the setting of fees and charges.
Scope and Application
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2010 applies to trustees, controlling trustees, and debt agreement administrators within the framework of the Bankruptcy (Estate Charges) Act 1997. It establishes the percentage payable as the Realisations Charge on amounts received by these entities, ensuring that the charge adequately recovers the cost of the Insolvency and Trustee Service Australia’s (ITSA) regulation and enforcement services. The Determination affects financial conduct and transactions related to bankruptcy, debt agreements, and personal insolvency agreements, thereby influencing the financial responsibilities of administrators involved in these processes. Geographically, the Determination operates under the Commonwealth of Australia, impacting entities involved in bankruptcies and debt agreements across the country. It does not specify exclusions or exemptions, but the application is contingent on the entities and transactions covered under the Act. The Determination extends its application through subordinate instruments, which may include further adjustments based on future cost recovery reviews and realisations.
Key Provisions
The main operative section of this Determination is Clause 5, which specifies the increase of the Realisations Charge from 3.5% to 4%. This change is effective from 1 July 2010, as stipulated in the commencement clause of the Determination. The Realisations Charge is levied on the amounts received by trustees, controlling trustees, and debt agreement administrators as part of the Bankruptcy (Estate Charges) Act 1997 (section 7(2)). This charge is designed to cover the costs of the regulation and enforcement services provided by the Insolvency and Trustee Service Australia (ITSA).
The Determination imposes specific obligations on trustees, controlling trustees, and debt agreement administrators to ensure that they correctly calculate and remit the Realisations Charge of 4% on the amounts they receive. These parties must adhere to the provisions set out in the Bankruptcy (Estate Charges) Act 1997 and the new charge rate specified in the Determination. Failure to comply with these requirements could potentially result in administrative or legal consequences.
In terms of consequences for non-compliance, the Determination does not explicitly detail specific offences or penalties. However, any breach of the requirements under the Bankruptcy (Estate Charges) Act 1997 may lead to civil or administrative penalties. While the Determination itself does not state maximum penalties, it is understood that the Act provides a framework for enforcement actions, which may include fines or other legal remedies. Therefore, trustees, controlling trustees, and debt agreement administrators must ensure strict adherence to the new charge rate to avoid any potential repercussions.