Laurie Ferguson (Reid, Australian Labor Party, Shadow Minister for Consumer Affairs) Share this | Hansard source

The member for Moncrieff has given a very long and highly emotional response to the question of the complicity of the current government with regard to the funding of the Iraqi insurgency. But I am afraid that he could equally be accused of plagiarism because, quite frankly, his tiresome response was the kind of contribution that we have heard from the Minister for Foreign Affairs and the Prime Minister over the last month or so—that of blissful ignorance; that they did not really know what was going on in the world and were totally ignorant and uninformed and basically out of the game.

As to the question of the OECD’s response to facilitation fees, he tells us today that, who knows when in the future, these will not be tax deductible because they will be exposed as bribes. That is all very well, but a government that quotes the OECD every second day of the week with regard to the labour market, social welfare and health systems cannot then turn around and basically dismiss so easily the OECD’s criticism of this country’s tax deductibility for these facilitation fees. As I say, it is all very well to give us these assurances—though I do not know what his assurances are worth, quite frankly—but, clearly, international experts in this area feel that the current practice with regard to facilitation fees is an option for bribery.

The other point made by a number of speakers was the culture of tax evasion in this country. We were regaled in parliament today with the list of donations from trade unions. The point I would make about those is that they are very public, much acknowledged and very well known. However, the current government, of course, is the architect, the innovator, with regard to the Greenfields Foundation and other related entities—and we will see attempts in the near future to further erode public scrutiny of political donations in this country.

Is it any wonder that it has taken so long to do anything about this area of bankruptcy evasion and people not paying taxes in a culture which looks at further increasing secrecy with regard to political donations? We all know about the intention of the government to increase the nonreportability of donations from the current level of $1,500 to $10,000. It is very convenient for the corporate sector that large numbers of donations will no longer have to be revealed to the general public and the public will not have the ability to examine government policy in the context of those donations. It is no wonder that we have had this growth in the culture of tax evasion, the question most recently in the public domain with the appointment of Mr Gerard to the Reserve Bank board and the controversy about that. I concede that for factional reasons elements in the Liberal Party in South Australia were very active in revealing Mr Gerard’s practices. But it is a matter of concern.

The purpose of the Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005 is to extend the clawback provisions in the Bankruptcy Act. The provisions contained in the bill are essentially designed to diminish the possibility of bankrupts transferring assets to third parties in anticipation of insolvency or bankruptcy. Quite clearly, the focus would be on the immediate family and close relatives et cetera, because that would be the direction to which they would turn. According to the explanatory memorandum, the legislation would:

(c)

void a transfer made to defeat creditors if it was reasonable for the transferee to infer that the bankrupt’s main purpose in transferring the property was to defeat creditors;

It would:

(d)

empower the court to make orders in relation to property or money of natural persons where during the period of up to 5 years prior to bankruptcy:

• the person acquired an estate in property as a direct or indirect result of financial contributions made by the bankrupt during that period; or the value of the person’s interest in particular property increased as a direct or indirect result of financial contributions made by the bankrupt during the period; and
• the bankrupt used or derived (whether directly or indirectly) a benefit from the property during the relevant period.

The bill also seeks to:

(d)

allow transcripts and notes from examinations under sections 77C and 81 of the Act to be used in proceedings under the Act, regardless of whether the person examined is a party to the proceedings ...

It would:

(e)

clarify section 120 to make it clear that a transfer will only be protected from this provision if market value consideration is given by the transferee to the bankrupt; and

(f)

amend sections 120 and 121 to make it clear that:

(vii)

the amount to be refunded to the transferee by the trustee is the amount that the transferee gave to the bankrupt; and

(ii)

‘consideration’ for the purposes of these provisions is not to include any right that the transferee has given to their bankrupt spouse to reside at the transferred property ...

The key objectives underpinning the bill are:

A proposed amendment will increase the time period in section 120 from 2 to 4 years where property was transferred to a related entity during that period for less than market value consideration. Examples of related entities are business partners, parents, children, relatives ...

This approach is based on the premise that gifts designed to dissipate assets rendering them unavailable to creditors are in practice more likely to be made to relatives and associates rather than to strangers. Further, it is common for people to be aware they are likely to become bankrupt more than 2 years before they become bankrupt ...

That makes it all the worse for those people whose financial circumstances are undermined by this kind of activity. It continues:

If transfers in this ... period can’t be declared void, it is open to a person to dispose of their assets in a way that will leave little for creditors (eg gifts to relatives). It is appropriate to extend the bar to doing this to 4 years, not 2, because in the period between 2 and 4 years there is too much scope for a person to deliberately divest themselves of assets.

In light of recent high-profile bankruptcies linked to corporate collapses, such as One.Tel, and the difficulties faced by creditors in getting access to the assets that the directors have seemingly stashed away in a complex maze of family trusts and gifts to associates, it seems that this bill is quite important in enabling creditors legitimate access to assets that would pay for shortfalls to innocent third parties.

With the above in mind, I feel compelled to point out an issue that has been raised with my office by numerous financial counsellors working at the coalface of bankruptcies—that is, the impact bankruptcy has on the families. Indeed, it is important to keep in mind that not all bankrupts are corporate high-flyers. Financial counsellors are concerned that the reality of many gambling related bankrupts being chased for money under this amendment may have enormous impact on their families. People would understand, crucially in New South Wales, that due to the heavy dependence for taxation on the club industry and the proliferation of gambling in hotels this is an increasingly serious problem. Whilst I support this bill, I caution that great care and attention be given so that it does not adversely affect and impact upon families struggling as a result of the gambling habits of one spouse.

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