EXPLANATORY STATEMENT
Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014
Summary
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014 (the Determination) is made under section 7 of the Bankruptcy (Estate Charges Act) 1997 (the Act) by the Attorney-General.
The instrument determines the percentage payable as the realisations charge on amounts received by trustees, controlling trustees and debt agreement administrators.
Background
The Australian Financial Security Authority (AFSA) has responsibility for the administration and regulation of Australia’s personal insolvency system. The realisation charge on funds realised in an administration is set at a level which substantially recovers the cost of AFSA’s regulation and enforcement activities.
The increase in the rate of the charge introduced by the Determination will be used to fund other activities which were previously funded by the Government including:
- Processing Creditor Petitions and Declarations of Intentions;
- Debt Agreements – Compliance and Education;
- Issuing Official Receiver notices under section 77CA of the Bankruptcy Act 1966; and
- Information provision.
Debtors, creditors and the general public benefit from AFSA’s regulation and enforcement activities and the other activities referred to above, which enhance the integrity and efficiency of the personal insolvency system.
Consultation
A review of AFSA’s activities and costs has been undertaken as part of a Cost Recovery Impact Statement (CRIS) on AFSA’s insolvency and trustee services that was developed in compliance with the Australian Government Cost Recovery Guidelines. As part of that process, a draft CRIS was provided to the Bankruptcy Reform Consultative Forum, which operates as a Cost Recovery Reference Group for this CRIS, and published on the Attorney-General’s Department website for public comment. The formal consultation period for the CRIS commenced on 6 February 2014 and closed on 28 February 2014. Issues raised by stakeholders during the consultation period were used in finalising the CRIS.
Regulation Impact Analysis
The Office of Best Practice Regulation has advised that the amendments provided for by the Determination do not require a regulation impact statement.
Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.
Notes on Sections
Section 1 – Name of Determination
Section 1 provides for the citation of the Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014.
Section 2 – Commencement
The Determination commences on 1 July 2014.
Section 3 – Repeal
Commencement of the Determination ends the application of the Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2013.
Section 4 – Amount of charge payable
Section 4 sets out the percentage payable as the realisations charge on amounts received by trustees, controlling trustees and debt agreement administrators. The amount payable is increased from 4.7% to 6.0%.
Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
This Legislative Instrument determines the percentage payable as the realisations charge on amounts received by trustees, controlling trustees and debt agreement administrators.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014 was enacted to address the need for the Australian Financial Security Authority (AFSA) to recover costs associated with its regulation and enforcement activities within the personal insolvency system. The Act, enacted in 1997, was amended by this Determination to increase the realisations charge from 4.7% to 6.0%, aiming to substantially recover the cost of AFSA’s activities which include processing creditor petitions, managing debt agreements, issuing notices under the Bankruptcy Act 1966, and providing information. The Determination was made by the Attorney-General under section 7 of the Bankruptcy (Estate Charges) Act 1997 and commenced on 1 July 2014. This change was made in response to a review of AFSA’s activities and costs, as outlined in the Cost Recovery Impact Statement, which underwent a consultation period in early 2014. The Determination also ensures compatibility with human rights as declared in the Human Rights (Parliamentary Scrutiny) Act 2011.
Scope and Application
The Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014 applies to trustees, controlling trustees, and debt agreement administrators within the framework of Australia's personal insolvency system, governed by the Bankruptcy (Estate Charges) Act 1997. The Determination specifies the percentage of the realisations charge payable on amounts received by these entities and is made under the authority of the Attorney-General. The primary objective of the Determination is to set a charge rate that enables the Australian Financial Security Authority (AFSA) to substantially recover the costs associated with the regulation and enforcement activities in the personal insolvency sector. The geographic and jurisdictional reach of the Determination is nationwide, as it pertains to the administration of the personal insolvency system across Australia. The Determination does not explicitly exclude or exempt any specific persons, entities, or transactions, but it does increase the charge rate from 4.7% to 6.0%, effective from 1 July 2014, thereby repealing the previous Determination from 2013. Any further extension or restriction of application is managed through subordinate instruments, although the current Determination itself does not delineate specific mechanisms for such actions.
Key Provisions
The main operative sections of the Bankruptcy (Estate Charges) (Amount of Charge Payable) Determination 2014 (sections 2, 3, and 4) set forth the commencement date of the Determination, the repeal of the previous Determination, and the specific percentage payable as the realisations charge on amounts received by trustees, controlling trustees, and debt agreement administrators. The Determination, made under section 7 of the Bankruptcy (Estate Charges Act) 1997, specifies that the charge is increased from 4.7% to 6.0%. This change in percentage is intended to fund the Australian Financial Security Authority's (AFSA) regulation and enforcement activities, as well as other activities previously funded by the government.
The Determination imposes specific obligations on trustees, controlling trustees, and debt agreement administrators. They are required to pay the newly set percentage of the realisations charge on amounts received, which is 6.0% as of the Determination's commencement on 1 July 2014. This obligation is essential to ensure that the costs associated with AFSA's activities are recovered through the personal insolvency system.
There are no specific offences, penalties, or civil/criminal consequences outlined in the text for breaches of the Determination. However, it is implicit that non-compliance with the charge payment obligation could lead to enforcement actions by AFSA or other regulatory bodies. The text does not provide details on the specific penalties for non-compliance, but it can be inferred that failure to adhere to the charge payment requirements could result in legal consequences, including potential fines or other enforcement measures by the relevant authorities.