EXPLANATORY STATEMENT
Select Legislative Instrument 2006 No. 125
Issued by authority of the Parliamentary Secretary to the Treasurer
Cheques Act 1986
Cheques Amendment Regulations 2006 (No. 1)
Section 119 of the Cheques Act 1986 (the Act) provides that the Governor-General may make regulations regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Section 76 of the Act permits that if a cheque is dishonoured, the indorser who has been compelled to pay the cheque may recover as damages, the sum ordered to be paid by the cheque, and the amount of any interest as determined by regulations.
The Cheques Regulations 1987 (the Principal Regulations) set out the appropriate rate of interest calculated for damages on a dishonoured cheque as the ‘average yield of the 13 week Treasury Notes’ (Treasury Note). ). Treasury Notes are no longer issued by the Government. . The last Treasury Notes were issued on 8 October 2003.
The purpose of the Regulations is to replace the rate of interest calculated for damages on a dishonoured cheque from the Treasury Note rate to a more appropriate rate of interest.
Other references to the Treasury Note in the Taxation Administration Act 1953 and other tax laws have been amended to refer to the ‘90-day Bank Accepted Bills published by the Reserve Bank of Australia’ (Bank Accepted Bill), by the Taxation Laws Amendment Act (No. 3) 2001. . However, similar amendments to the Principal Regulations were not made.
For reasons of consistency with other Acts and in light of prior policy decisions, the Bank Accepted Bill rate replaces the Treasury Note rate in the Principal Regulations.
The Regulation regulation[sfl1] was deemed a technical amendment by the Office of Regulatory Review; therefore no Regulatory Impact Statement was required to be prepared.
The Regulations commenced on the day after registration.
[sfl1]Upper case for a set of Regulations, lower case for each regulation within that set.
Overview
The Cheques Amendment Regulations 2006 (No. 1) were enacted to address the obsolescence of the Treasury Notes, which were previously used to determine the interest rate applicable to damages in the event of a dishonoured cheque under the Cheques Act 1986. These regulations were made under Section 119 of the Act, which empowers the Governor-General to make regulations necessary for carrying out the Act. The policy objective of these amendments is to ensure consistency with other legislative instruments by replacing the outdated Treasury Note rate with the 90-day Bank Accepted Bill rate, as recommended by prior policy decisions and adjustments made to the Taxation Administration Act 1953. This amendment ensures that the interest rate used for damages in the event of a dishonoured cheque remains current and relevant, thereby maintaining the integrity and effectiveness of the legal framework governing cheque transactions.
Scope and Application
The Cheques Amendment Regulations 2006 (No. 1) apply to any person or entity affected by the Cheques Act 1986, including those who issue, draw, accept, indorse, or otherwise deal with cheques in Australia. The Act and its amendments govern the conduct and transactions involving cheques, ensuring compliance with the regulations that dictate the recovery of damages for dishonoured cheques. Geographically, the Act applies nationally, encompassing all states and territories within the Commonwealth of Australia. The Regulations themselves provide a specific amendment to the Principal Regulations by replacing the outdated rate of interest based on Treasury Notes with the Bank Accepted Bill rate, ensuring consistency with other legislative changes and current financial instruments. Although the Regulations are technical in nature and did not require a Regulatory Impact Statement, they nonetheless have a significant impact on the financial obligations and recoveries related to dishonoured cheques across the nation.
Key Provisions
The main operative sections of the Cheques Amendment Regulations 2006 (No. 1) concern the adjustment of the interest rate for calculating damages on a dishonoured cheque. Section 1 of the Regulations replaces the former rate, which was based on the average yield of the 13-week Treasury Notes, with a new rate. This change was made necessary because the government ceased issuing Treasury Notes, with the last issuance occurring on 8 October 2003. To ensure consistency with other legislative amendments, the new rate of interest is now based on the 90-day Bank Accepted Bills published by the Reserve Bank of Australia, as referenced in Section 2 of the Regulations.
These Regulations impose specific obligations on the parties involved in cheque transactions. Firstly, the new interest rate must be used to calculate damages for cheques dishonoured after the Regulations came into effect. This means that any indorser who has been compelled to pay a dishonoured cheque can now recover damages that include the principal sum and interest calculated at the new rate. The interest rate must be applied in accordance with the specified formula provided in the Regulations. This change ensures that the interest rate used for calculating damages on dishonoured cheques is aligned with current financial instruments and market practices.
The Cheques Amendment Regulations 2006 (No. 1) also address potential breaches and consequences related to the dishonour of cheques. While the Regulations themselves do not introduce new offences or penalties, they ensure that the calculation of damages for dishonoured cheques is legally consistent with other legislative amendments. If a cheque is dishonoured and an indorser is compelled to pay, the indorser can recover the cheque's principal amount and the newly prescribed interest rate. Failure to adhere to the new interest calculation method could result in disputes or legal action, although the Regulations do not specify additional penalties for non-compliance beyond those already outlined in the Cheques Act 1986.
In summary, the Cheques Amendment Regulations 2006 (No. 1) make a significant change by updating the interest rate used to calculate damages for dishonoured cheques, ensuring that the method is in line with current financial instruments and market practices. These Regulations impose obligations on the parties involved in cheque transactions to use the new interest rate in their calculations. While the Regulations do not introduce new offences or penalties, they do provide a clear framework for determining damages in cases of cheque dishonour, thereby maintaining legal consistency and fairness in cheque transactions.