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Chapter 1 - Introduction
Background
1.1
On 7 December 2006, the Senate referred the Bankruptcy Legislation
Amendment (Superannuation Contributions) Bill 2006 (the Bill) to the Standing
Committee on Legal and Constitutional Affairs, for inquiry and report by 8 February 2007.
1.2
The Bill proposes to amend the Bankruptcy Act 1966 (Bankruptcy
Act), the Payment Systems and Netting Act 1998, and the Proceeds of
Crime Act 2002 to:
- allow bankruptcy trustees to recover superannuation contributions
made prior to bankruptcy with the intention of defeating the claims of
creditors;
- provide for certain rural support grants to be exempt from the
property available to pay creditors in cases of bankruptcy; and
- make minor technical amendments to clarify or improve the
operation of the Bankruptcy Act.
1.3
The principal purpose of the major amendments proposed by the Bill is to
allow bankruptcy trustees to recover superannuation contributions made with the
intention of defeating creditors. As jointly announced by the Attorney-General
and the Minister for Revenue & Assistant Treasurer on 27 July 2006, these amendments will apply to superannuation contributions made on or after 28 July 2006.[1] The effect of
the amendments will be that payments to superannuation plans to defeat
creditors will be recoverable in the same way as other payments or transfers to
defeat creditors.
1.4
According to the Explanatory Memorandum (EM), these amendments will:
- allow a bankruptcy trustee to recover the value of contributions
to an eligible superannuation plan made by a bankrupt to defeat creditors
(along the lines of current section 121 of the Bankruptcy Act);
- allow the trustee to recover contributions made by a person other
than the bankrupt for the benefit of the bankrupt where the bankrupt's main
purpose in participating in the arrangement was to defeat creditors;
- ensure that consideration given by the superannuation trustee for
the contribution will be ignored in determining whether the contribution is
recoverable by the bankruptcy trustee, thus overcoming the effect of the High
Court's decision in Cook v Benson;[2]
- allow a court to consider the bankrupt's historical contributions
pattern and whether any contributions were 'out of character' in determining
whether they were made with the intention to defeat creditors;
- provide that a superannuation fund will not have to repay any
fees and charges associated with the contributions or any taxes it has paid in
relation to the contributions; and
- give the Official Receiver the power to issue a notice to the
superannuation fund or funds that are holding the contributions that will put a
freeze on the funds, in order to prevent the bankrupt from rolling them over
into another fund or otherwise dealing with them in circumstances where the
trustee is entitled to recover them.[3]
1.5
In his Second Reading Speech, the Minister for Justice and Customs
stated that:
The amendments provide an appropriate balance between the need
to encourage people to save for retirement and the need to protect creditors
from unscrupulous debtors who can currently attempt to avoid paying their debts
by converting wealth into superannuation in the lead up to bankruptcy. They
will allow superannuation contributions to be recovered only where there has
been deliberate action by the bankrupt to avoid paying creditors.
The amendments have been developed following extensive public
consultation. The approach taken by these amendments avoids the complexity of
earlier proposals and is consistent with the Government's plan to simplify and
streamline superannuation.[4]
Conduct of the inquiry
1.6
The committee advertised the inquiry in The Australian newspaper
on 12 December 2006, and invited submissions by 19 January 2007. Details of the inquiry, the Bill, and associated documents were placed on the
committee's website. The committee also wrote to over 160 organisations and
individuals.
1.7
The committee received 15 submissions which are listed at Appendix 1.
Submissions were placed on the committee's website for ease of access by the
public.
1.8
The committee held a public hearing in Canberra on 23 January 2007. A list of witnesses who appeared at the hearing is at Appendix 2 and copies of the
Hansard transcript are available through the Internet at http://aph.gov.au/hansard.
Acknowledgement
1.9
The committee thanks those organisations and individuals who made
submissions and gave evidence at the public hearing.
Note on references
1.10
References in this report are to individual submissions as received by
the committee, not to a bound volume. References to the committee Hansard are
to the proof Hansard: page numbers may vary between the proof and the official
Hansard transcript.
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