Referral and summary of the Bill
On 5 July 2011, Senator Nick Xenophon introduced into the Senate the Bankruptcy
Amendment (Exceptional Circumstances Exit Package) Bill 2011. The Bill seeks to
amend the Bankruptcy Regulations 1996 to exempt grants made on or after
1 July 2010 under the Exceptional Circumstances Exit Package (EC Exit Package) from
bankruptcy proceedings, so long as the final orders have not been made.
The EC Exit Package was part of the drought assistance measures announced
in September 2007 by the Howard Government. The main component of the EC Exit
Package, the $150,000 EC Exit Grant, offered 'time-limited, one-off exit
assistance for those farmers within an EC declared area that sell their farm
enterprise and leave farming'.
The EC Exit Package is currently not exempted from the laws governing
bankruptcy proceedings, and therefore any grants received may be divisible
among a recipient's creditors if they become bankrupt.
During his Second Reading Speech on the Bill, Senator Xenophon reasoned:
... it is vital that families who make the difficult
decision to leave their farms—some of which have been in their family for
generations—are able to fully utilise the money they receive under the package
so they can start their new lives.
On 7 July 2011, the Senate referred the Bill to the Economics
Legislation Committee for inquiry and report by 21 September 2011.
Conduct of the inquiry
The committee advertised the inquiry in The Australian and on its
website. The committee also wrote to the relevant Commonwealth departments and
agencies, state governments, bankruptcy industry groups, peak farmer
representative bodies and other stakeholders inviting submissions. The
committee received nine submissions, which are listed in Appendix 1.
Outline of the report
This report consists of four chapters:
The remaining section of this chapter discusses the approach
taken by the Bill of amending subordinate legislation via primary legislation
and the consideration of the Bill by the Senate Standing Committee for the Scrutiny
Chapter 2 provides an overview of the EC Exit Package, and
outlines the current treatment of that program, and other government rural
support schemes, under bankruptcy law.
Chapter 3 presents the views on the Bill outlined in evidence
received from submitters.
The provisions of the Bill and remaining matters are discussed in
chapter 4. The committee's views on the Bill and its recommendations can be
found at the end of that chapter.
Bills amending regulations
It is rare for a bill to be proposed (or passed) which amends
subordinate legislation, such as regulations. The Office of Parliamentary
Counsel's advice to its drafters argues against using bills to amend
regulations except for 'compelling reasons'. A number of practical concerns are
raised, such as the need to ensure there are not any other regulations made
with suspended commencements pending, or that other amendments to the
regulations are not made which could affect the amendments to be made by the
The Legislative Instruments Act 2003 (LI Act), which commenced
operation on 1 January 2005, provides a framework for the registration,
publication, parliamentary scrutiny and sunsetting of subordinate legislation.
The LI Act requires legislative instruments to be published on the Federal
Register of Legislative Instruments. However, the LI Act envisages a situation
in which an Act amends regulations—subsection 33(1) simply requires the
department to cause a compilation of the amended principal legislative
instrument as soon as practicable.
One example of a bill being introduced which sought to amend regulations
(prior to the passage of the LI Act) is the Migration Legislation Amendment
(Parents and Other Measures) Bill 2000. This was a government bill which
amended primary legislation but also proposed amending the Migration
Regulations 1994—although this aspect of the bill was subsequently opposed
by the Senate. Nevertheless, the Bills Digest on this bill observed:
Whatever the merits of the proposed measures, it is at least
possible that concern could be directed to the process adopted by the Bill. As
indicated, Schedule 3 directly amends the Migration Regulations 1994. While the
process of using principal legislation to amend subordinate legislation is
unusual it would seem to be valid. But the approach is not standard practice
and may cause unintended difficulties.
Returning to the Bill being examined by this committee, rather than
amending primary legislation to give effect to the matters concerning the Bill,
however, amendments to the regulations may be more appropriate. Such an
approach was argued in 2006 when it was proposed that excluding government rural
support schemes from bankruptcy proceedings should not require amendments to
primary legislation, but should be made by regulations:
Grant schemes may be introduced (or amended) and payments to
primary producers commenced within a short period. Rapid introduction (or
amendment) of schemes may be necessitated by the circumstances giving rise to
the creation (or amendment) of the schemes. Accompanying protections under the
Bankruptcy Act for those payments must therefore also be capable of being
Consideration by the Scrutiny of
The Senate Standing Committee for the Scrutiny of Bills assesses
legislative proposals against a set of accountability standards that focus on
the effect of proposed legislation on individual rights, liberties and
obligations, and on parliamentary propriety.
The Scrutiny of Bills Committee has had the opportunity to review the
Bill. That committee observed that clause 3 of the Bill may constitute a 'Henry
because it 'states that the amendments in schedule 1 to regulations can be
amended or repealed by regulations made under the bankruptcy legislation'. The
Scrutiny of Bills Committee concluded:
Technically, this enables regulations to modify the operation
of primary legislation and may thus be thought to inappropriately delegate
legislative power. However, given the proposed amendments in the bill relate to
the operation of existing regulations, the Committee leaves the question of the
appropriateness of this provision to the Senate as a whole.
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