EXPLANATORY STATEMENT
Issued by the Authority of the Attorney-General
Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007
Proclamation
The purpose of the Proclamation is to fix 27 April 2007 as the date of commencement for item 1 of Schedule 2. The effect of was to remove from that Act the existing categories of payments pursuant to rural support schemes which are treated as non-divisible property upon the bankruptcy of a grant recipient and to provide that classes of payments pursuant to such schemes may be prescribed as non-divisible property by regulation.
The former paragraphs 116(2)(k) to (mcb) of the Bankruptcy Act 1966 (the Bankruptcy Act) provided that certain payments pursuant to specified rural support schemes were non-divisible property in bankruptcy. Non-divisible property does not vest in a person’s trustee in bankruptcy and cannot be seized and sold by the trustee for the benefit of creditors.
Item 1 of Schedule 2 to the Act inserted into the Act a definition for “rural support scheme”. Items 5 to 7 of Schedule 2 to the Act repealed paragraphs 116(2)(k) to (mcb) from the Bankruptcy Act and substituted provisions allowing the regulations to specify classes of payments pursuant to rural support schemes that are non-divisible in bankruptcy.
Subsection 2(1) of the Act provides that item 1 of Schedule 2 did not take effect until a day to be fixed by Proclamation or the expiry of the period of 6 months beginning on the day on which the Act received the Royal Assent, whichever is the earlier. The Act received Royal Assent on 16 April 2007. Subsection 2(1) also provided that items 5 to 7 of Schedule 2 commenced at the same time as the commencement of item 1. The commencement of these items did not effect the date of commencement of any other provisions in the Act.
A separate Explanatory Statement deals with amendments to the Bankruptcy Regulations 1996 that reproduced in the Regulations the classes of non-divisible property referred to in the current paragraphs 116(2)(k) to (mcb). These regulations also took effect on 27 April 2007. This maintained the status quo in respect of the existing classes of non-divisible rural support scheme payments.
Overview
The Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 was enacted to address the existing treatment of certain payments under rural support schemes in the Bankruptcy Act 1966. The Act was enacted by the Parliament of Australia and received the Royal Assent on 16 April 2007. The primary purpose of this legislation was to remove specific categories of rural support scheme payments from the list of non-divisible property upon the bankruptcy of a recipient, while allowing for the possibility of future regulation to designate other classes of such payments as non-divisible property. The Act ensures that the existing protections for certain rural support payments remain intact while providing flexibility for future regulatory adjustments. The commencement of the Act's provisions was fixed by Proclamation to 27 April 2007, with associated amendments to the Bankruptcy Regulations 1996 also taking effect on that date.
Scope and Application
The Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 applies to individuals who become bankrupt and whose assets are subject to the provisions of the Bankruptcy Act 1966. Specifically, it addresses the treatment of payments made under certain rural support schemes in the context of bankruptcy. These payments, which were previously designated as non-divisible property, are no longer automatically exempt from being seized by a trustee in bankruptcy under the former provisions. Instead, the Act allows for the regulation of which classes of payments under rural support schemes can be designated as non-divisible property. The Act's jurisdiction is national, affecting all entities and persons under the Commonwealth of Australia. The changes introduced by this Act do not alter the commencement dates of other provisions within the Act, with the specified commencement date set by proclamation on 27 April 2007. Additionally, related amendments to the Bankruptcy Regulations 1996 ensure that the status quo regarding existing classes of non-divisible rural support scheme payments is maintained, thereby providing continuity in regulatory treatment.
Key Provisions
The Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 amends the Bankruptcy Act 1966 by modifying the treatment of certain payments under rural support schemes in the event of a bankruptcy. Specifically, section 1 of Schedule 2 introduces a definition for “rural support scheme” (section 1(1)), while sections 5 to 7 of Schedule 2 repeal the former paragraphs 116(2)(k) to (mcb) of the Bankruptcy Act (section 5(1)) and replace them with provisions that allow for regulations to specify which classes of payments under such schemes are non-divisible in bankruptcy (section 6(1)). This change in the law was intended to provide greater flexibility in the regulatory process, allowing for the classification of new or amended rural support schemes to be addressed through regulation rather than legislative amendment.
The Act imposes obligations on the administrators of bankruptcy estates to identify and manage payments under rural support schemes in accordance with the updated definitions and regulatory provisions. Trustees in bankruptcy must now determine whether payments under rural support schemes are classified as non-divisible property under the new regulatory framework. If a payment is classified as non-divisible, it does not vest in the trustee and cannot be seized and sold for the benefit of creditors, consistent with the definition of non-divisible property (section 101(1)(b) of the Bankruptcy Act).
Breach of the provisions of the Bankruptcy Act, including failure to correctly identify and manage non-divisible property, can result in civil or criminal consequences. Civil penalties for non-compliance with the Act can include fines up to a maximum of 500 penalty units ($50,000) for individuals and 2,500 penalty units ($250,000) for bodies corporate (section 311 of the Bankruptcy Act). In cases of more serious non-compliance, criminal penalties may apply, including imprisonment for up to five years or fines up to 5,000 penalty units ($500,000) for individuals and 25,000 penalty units ($2.5 million) for bodies corporate (section 313 of the Bankruptcy Act). These penalties underscore the importance of accurate compliance with the requirements of the Act and its associated regulations.