Bills Digest no. 79 2009–10
Bankruptcy Legislation Amendment Bill 2009
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact officer & copyright details
Date introduced: 28 October 2009
Commencement: Schedules 1, 2, and Part 2 of Schedule 4 commence on
a single day to be fixed by Proclamation (which need not be the
same day for all three Schedules), or the day after 6 months from
Royal Assent, whichever occurs first. Schedule 3 commences on the
day after Royal Assent. Part 1 of Schedule 4 commences on the
28th day after Royal Assent. The rest of the Act
commences on the day of Royal Assent.
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
To amend the Bankruptcy Act
1966 (the Act) to make a range of amendments, most
- to increase the threshold for bankruptcy from a minimum debt of
$2000 to $10 000
- to increase timeframes under the Act to give potential
bankrupts more time to pay before creditors can take action to
- to widen the availability for debtors to enter voluntary debt
agreements with creditors
- to remove an outdated and unnecessary system of
‘Bankruptcy Districts’ from the Act
- to create a new infringement notice regime with updated
penalties for offences under the Act, and
- to update the methods of determining the remuneration of
trustees under the Act.
announced the proposed reforms to bankruptcy legislation in
August 2009.  In
his second reading speech, the Minister commented that the reforms
contained in the Bill are the result of ongoing consultation with
industry dating back to 2007 and 2008.  The proposed reforms contained in this
Bill are a response to an identified need for modernisation of the
legislation, to account for the changing climate of consumer
spending and debt levels; and also to adjust statutory income and
remuneration thresholds to recognise the changing value of money
exposure draft was released for public consultation in 2009.
submissions were received.
The Bill was introduced into the House of Representatives on 28
October 2009 and was passed unamended through the House on 1
December 2009, with the support of the Opposition.  It was introduced into the Senate
for debate on 2 December 2009.
The Bill has been referred to the Senate Legal and
Constitutional Affairs Legislation Committee for inquiry and report
by 2 February 2010. Details of the inquiry are at the
Committee website. 
The Explanatory Memorandum indicates that the decision to
increase the threshold for bankruptcy is based on a number of
factors, such as:
- the relative cost of winding up a debtor’s estate
- the changed value of money since the $2000 threshold was first
established in 1996, and
- the general increase in levels of personal debt. 
However, there is no indication in the Explanatory Memorandum
that the decision to set the new threshold at $10 000 is based on
any assessment of acceptable debt levels. Rather, the Explanatory
Memorandum provides statistics on recent bankruptcy activity:
During 2008–09, of 1953 sequestration orders made across
Australia and matched by amounts in Bankruptcy Notices, 1551 were
for an amount greater than $10,000; 217 were for an amount between
$5,001 and $10,000; and 174 were for an amount between $2,000 and
Submissions received by the Attorney-General’s Department
in response to the exposure draft of the Bill in 2009 showed a
mixed response to the proposed increased bankruptcy threshold of
For example, Abacus – Australian Mutuals Limited (an
association of building societies and credit unions) noted that an
increase in the threshold is necessary, but that $5000 would be a
more appropriate threshold:
Multiple credit card and personal loan debts are common... A
single debtor could feasibly have three credit card debts of $8,000
each plus a personal loan of $8,000 with four creditors – a
$32,000 debt and in some circumstances, reasonable grounds for
bankruptcy should all other options be exhausted.
Increasing the threshold to $5,000 rather than $10,000 will
minimise this problem. Alternatively, should the threshold increase
to $10,000, Abacus recommends the inclusion of an aggregation
measure that allows any creditor to petition for bankruptcy on a
debt less than $10,000 should the aggregate debts across all
creditors exceed the threshold. 
Other stakeholder submissions agreed with the increased
threshold but expressed a view that finer details of the
threshold’s application should be reviewed (such as the
application of the threshold to aggregate debts, or recognition of
original debts as opposed to final judgment debts).  The Law Council of
Australia does not support the amendment, stating that no case has
been made out to support the increase of the threshold. 
Under the proposed new infringement notice scheme in the Bill,
infringement notices can be issued to people who contravene a range
of provisions in the Act relating to a range of less serious,
strict liability matters as an alternative to prosecution. The
proposed scheme is not set out in the Bill; rather, the Bill
provides for the making of regulations establishing the scheme.
notices will be able to be issued by a non-judicial officer to
suspected offenders, and allow suspected offenders to pay a penalty
fee to avoid prosecution. The penalties payable are set out in
item 82 of Schedule 2 of the Bill
and should not exceed one-fifth of the maximum fine payable for the
offence under the Act.  This new infringement notice regime is supported by
widened powers of investigation for the Inspector-General contained
in the Bill. 
In his second reading speech, the Attorney-General stated that
these amendments will ‘assist in highlighting the different
treatment for bankrupts who engage in criminal activity compared
with those who are simply unfortunate’. 
Debt agreements are set out in Part IX of the Act. The Part sets
out a statutory framework for debtors and creditors to enter a
voluntary agreement which is processed, approved and monitored by
the Official Receiver. Access to debt agreements is based on an
income threshold test. Again, as a recognition of the changed value
of money and the increased debt levels of individuals recently, the
income threshold for entering voluntary debt agreements is being
raised by 20 per cent under the Bill.  This will make the debt agreement
scheme accessible to more individuals.
Schedule 1 – Trustee remuneration
Schedule 1 to the Bill makes amendments to the
Bankruptcy Act 1966 dealing with the remuneration of
trustees of estates of bankrupts.
Item 1 repeals subsections 64U(2) to (4) of the
Act. Items 2–6 make consequential amendments
to section 64U. These paragraphs deal with the way
the issue of remuneration is dealt with at a meeting between a
bank’s creditors and a trustee.
Item 7 inserts a new subsection
64ZBA(2A) into the Act. The section details what a notice
outlining a trustee’s proposal to creditors must include if
it relates to how a trustee is to be remunerated. It requires the
inclusion of information about the rate of remuneration or
commission, including an estimate of the total amount of the
Item 9 replaces current subsection 161B(1) with
a revised provision. The subsection currently sets the minimum
entitlement of a trustee’s remuneration at $1109.
Item 9 amends the subsection to increase the
statutory minimum entitlement for trustees to $5000, or an amount
prescribed by the regulations.
Item 12 amends subsection 162(4) of the Act,
which deals with remuneration which has not been fixed by a
creditor’s resolution or the committee of inspection. The
subsection currently defaults to the regulations for determining
the amount of remuneration.  The amendments create a new system for
determining remuneration, allowing a trustee to make an application
to the Inspector-General for determination of his or her
Item 13 repeals current section 167 and inserts
new sections 166 and 167.
 The current
section 167 deals with the taxation of costs incurred by the
trustee. Provisions dealing with taxation of trustees are contained
Bankruptcy (Fees and Remuneration) Determination 2008. 
New sections 166 and 167
outline how remuneration is to be dealt with by trustees.
New section 166 deals with payments for services
provided by third parties, and states that the trustee must give
notices about such payments as required by the regulations.
New section 167 deals with reviews of
remuneration, and also largely refers to the regulations for
instruction on how such reviews must be conducted. The regulations
could be subject to parliamentary disallowance under Part 5 of the
Legislative Instruments Act 2003.
Schedule 2 – Offence provisions
Schedule 2 to the Bill sets out a range of
provisions dealing with offences under the Bankruptcy Act
1996. The Explanatory Memorandum explains that these are
intended to ‘strengthen the penalties for some offences and
ensure these are in line with the penalties for other similar
offences’.  New paragraph 12(1)(bc),
inserted into the list of functions of the Inspector-General under
the Act, enables the Inspector-General to make such inquiries and
investigations as he or she thinks fit with respect to whether a
person has committed an offence under the Act (item
2). New subsections 12(2A)–(2E) set
out the procedure providing notices to persons who are believed to
have information relevant to such an inquiry or investigation
(item 4). Failure to comply with these notices is
an offence punishable by up to 12 month’s imprisonment
(new subsection 12(2C)).
Various provisions in Schedule 2 deal with
penalties under the Act, and are consequential to the introduction
of a new infringement notice regime (see items 82 and
83). These provisions insert some new penalties
(generally, of 5 penalty units) and increase some existing
penalties (to 25 penalty units). Offence provisions are amended
relating to matters such as:
- sequestration orders
- filing statements of affairs
- compositions and arrangements
- powers of official receivers
- surrender of passports
- notification of annulments
- trustee’s requirement to provide certificate of
- trustee not to pay money into a private bank account
- annual estate returns, trustees books, records and accounts,
- notification of death of trustee or administrator
Item 82 inserts a new section 277B
– Infringement notices for offences into the Act.
The new section enables regulations to be made for the issuing of
infringement notices for contravention of the Act. The regulations
(and thus the details of the infringement notice scheme) would be
subject to parliamentary disallowance under Part 5 of the
Legislative Instruments Act 2003. The table in new
subsection 277B(2) sets out the penalties payable for alleged
offences. Most of the offences listed attract only 1 penalty unit,
with no offence attracting higher than 5 penalty units.
Item 83 inserts a provision into the Act allowing
for penalties to be paid for alleged offences in lieu of
Item 84 sets out the application for the new
and changed offence provisions in Schedule 2.
Schedule 3 – Removal of bankruptcy districts
Schedule 3 sets out provisions for the removal
of references to ‘Bankruptcy Districts’ in the Act, a
system which has been deemed outdated. 
Schedule 4 – Other amendments
Schedule 4 sets out other amendments to the
Act, notably, to increase the threshold of the amount required for
a creditor to file a petition, or for the issue of a bankruptcy
notice against a debtor. The amendment increases the amount from
$2000 to $10 000 (items 1–4).
Also of note are:
item 5 of Schedule 4, which
amends the definition of stay period from 7 days to 28
days. The stay period is the period of time after a debtor
gives the Official Reciever a declaration of intent to file a
debtor’s petition (that is, to commence the bankruptcy
process) before a creditor can take action against that debtor to
recover debts, and
- item 11 of Schedule 4, which
increases the threshold amounts for eligibility for debtors to
enter into debt agreements.
R McClelland MP
(Attorney-General), Reforms to personal bankruptcy laws,
media release, 25 August 2009, viewed 4 January 2010,
See R McClelland MP
(Attorney-General), Reform to remuneration of bankruptcy
trustees, media release, 30 October 2008, viewed 13 January
and R McClelland, Speech to the Insolvency Practitioners
Association of Australia National Conference, Sydney, speech,
22 May 2008, viewed 13 January
‘Bankruptcy Legislation Amendment Bill 2009 – Exposure
Draft’, Attorney-General’s Department website, viewed
13 January 2010,
S Ley MP, ‘Second reading
speech: Bankruptcy Legislation Amendment Bill 2009’, House of
Representatives, debates, 26 November 2009, p. 152.
Explanatory Memorandum, Bankruptcy
Legislation Amendment Bill 2009, pp. 23–24.
Ibid., p. 24.
Abacus – Australian Mutuals
Limited, Submission to the Attorney-General’s Department,
Bankruptcy Legislation Amendment Bill 2009 – Exposure
Draft, 23 September 2009, p. 3.
See Consumer Action Law Centre,
Submission to the Attorney-General’s Department,
Bankruptcy Legislation Amendment Bill 2009 – Exposure
Draft, 14 September 2009, p. 4; also Legal Aid NSW, Submission
to the Attorney-General’s Department, Bankruptcy
Legislation Amendment Bill 2009 – Exposure Draft, 14
September 2009, p. 2.
Law Council of Australia, Submission to the
Attorney-General’s Department, Bankruptcy Legislation
Amendment Bill 2009 – Exposure Draft, 30 September 2009,
Proposed section 277B in item
82 of Schedule 2 to the Bill.
Item 83 of Schedule
2 to the Bill; proposed paragraph 315(2)(l).
Items 2–4 of
Schedule 2 to the Bill.
R McClelland MP (Attorney-General),
‘Second reading speech: Bankruptcy Legislation Amendment Bill
2009’, House of Representatives, Debates, 28 October
2009, p. 11169, viewed 13 January
Item 11 of Schedule
4 to the Bill.
The Explanatory Memorandum (p. 5) explains that
the Regulations currently sets out a default remuneration scale
based on the IPAA Guide to Hourly Rates, and that use of this
default scale has been judicially criticised.
There is currently no section 166 in the
viewed 14 January 2010.
Explanatory Memorandum, p. 1.
Further details about Bankruptcy Districts are
available in the Explanatory Memorandum, pp 21-23.
18 January 2010
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