Gary Nairn (Eden-Monaro, Liberal Party, Special Minister of State) Share this | Hansard source

I present the explanatory memorandum to this bill and I move:

That this bill be now read a second time.

The Bankruptcy Legislation Amendment (Superannuation Contributions) Bill 2006 will amend the Bankruptcy Act 1966 to provide that bankruptcy trustees can recover superannuation contributions made to defeat the claims of creditors.

These amendments respond to the High Court’s decision in Cook v Benson, the effect of which has been to make it very difficult for bankruptcy trustees to recover superannuation contributions made by a person in the lead-up to bankruptcy, even where those contributions were made specifically with the intention to defeat creditors. This represents a significant threat to the integrity of the bankruptcy system because it means that a person facing bankruptcy can transfer assets into superannuation to ensure they are not available to pay creditors. As jointly announced by the Minister for Revenue and Assistant Treasurer and the Attorney-General on 27 July 2006, the amendments will apply to superannuation contributions made on or after 28 July 2006.

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. I would like to note the report of the Senate Standing Committee on Legal and Constitutional Affairs following its inquiry into this bill. The committee noted the extensive public consultation undertaken in developing these amendments and the broad support for these amendments and recommended that the bill be passed.

The amendments are based on section 121 of the act, which deals with transfers of property by a person who subsequently becomes bankrupt where the transfer was made with the intention to defeat creditors. The new provisions will ensure superannuation contributions made with the same intent are recoverable on the same basis as other transfers.

In line with section 121, the new rules will allow the trustee to assume that superannuation contributions were made with the intention to defeat creditors where the bankrupt was insolvent at the time of making the contributions. The court will also be empowered to consider the bankrupt’s history of making superannuation contributions in determining whether the requisite intention existed at the time.

Where contributions are void under the new provisions, the official receiver will have the power to issue notices to the trustee of the superannuation plan requiring payments to be made to the bankruptcy trustee. These powers are already exercised by the official receiver under section 139ZQ of the act in relation to other void transfers.

This bill includes other amendments to facilitate recovery of void superannuation contributions, including a power for the official receiver to issue a superannuation account-freezing notice to prevent any dissipation of funds. The bill also provides clear protection for superannuation fund trustees who comply with notices issued by the official receiver to recover contributions.

The bill also contains amendments designed to protect certain types of rural grants in the event of the recipient’s bankruptcy. The Bankruptcy Act already protects certain types of grants—for example, grants pursuant to the Dairy Exit Program and the Farm Help Re-establishment Grant Scheme. The amendments represent no change in policy and will simply allow new classes of grants to be exempted more quickly.

Finally, the bill also includes some minor and technical amendments to improve the operation of the Bankruptcy Act.

I commend the bill to the House.

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