Mark Baker (Braddon, Liberal Party) Share this | Hansard source

The primary objective of the Bankruptcy Legislation Amendment (Superannuation Contributions) Bill 2006 will allow bankruptcy trustees to recover superannuation contributions made prior to bankruptcy with the intention to defeat creditors. These amendments will apply to superannuation contributions made on or after 28 July 2006. The bill also contains amendments to facilitate recovery of void superannuation contributions by building on existing administrative recovery powers exercised by the official receiver and, where appropriate, providing the court with powers to make orders for payment by superannuation fund trustees.

More importantly for the rural community—and I include my electorate of Braddon—this bill also contains amendments designed to improve the operation of the act, particularly in relation to the treatment of rural support grants where the recipient is bankrupt or becomes bankrupt.

I support the objectives of the bill, which include: (1) providing for the recovery of superannuation contributions made with the intention to defeat creditors; (2) providing for certain rural support grants to be exempt from the property available to pay the bankrupt’s creditors; and (3) to improve the understanding and operation of the act within the legal framework.

In my previous occupation within the financial planning sector, I always encouraged and supported people to save and plan for their retirement through superannuation. Superannuation is currently and will always remain one of the most tax effective means to save for retirement. The progressive changes the Howard government has introduced to make superannuation a more valuable retirement planning tool for our ageing population has also provided the ability to place a larger amount of contributions into their fund.

The superannuation changes that the Treasurer announced in the 2006 budget represent the most significant change to Australia’s superannuation system in decades. The changes, which were welcomed right across the financial sector, will remove the complex issues that are faced by retirees, will increase retirement incomes, provide greater flexibility as to how and when superannuation can be drawn down and improve incentives for those older Australians who, due to the tremendous economy that we now experience, wish to stay in the workforce.

The changes removed the complexity of the old pre- and post-taxed and untaxed components. These were an absolute nightmare for anyone within the financial sector to deal with, and the Treasurer and the Howard government needs to be congratulated on removing these complexities. As a result of the abolishment of reasonable benefits limits and age based limits, a simple universal contribution limit will apply. People will now not be forced to draw down on their retirement savings.

The abolishment of the reasonable benefits limit and its impact on bankruptcy still provides for potential bankruptees to act with intent to defraud creditors. However, the proposed legislation will certainly act as a deterrent to those contemplating defeating their creditors. The Howard government has allowed individuals to contribute up to $1 million into their superannuation until midnight on 30 June this year, which is an excellent incentive to encourage savings for our ageing population. The addition of the term ‘out of character’ also provides for a review of such contributions and their intent in the case of bankruptees.

The benefit of this bill to creditors against unscrupulous individuals who may be going bankrupt after transferring funds to his or her superannuation during the period 28 June 2006 to 30 June 2007 will be that the transfer can now be deemed ‘out of character’ and, as such, be repealed by the official receiver.

Additionally, creditors will have protection against current practices of potential bankruptees utilising family members and protection under family law courts regarding funds that are contributed on behalf of family members. The bill will allow for such contributions to be investigated and for their intent to be reviewed and, where it is considered out of character, such funds can now be drawn back into the creditors pool.

I commend this legislation not only for its protection of creditors and for supporting the fair treatment of all sides in a bankruptcy situation but also for its potential reforms and participative systems that will be introduced throughout the industry, from legal to superannuation and financial planning, to comply with this bill. This legislation will enable superannuation trustees to work more closely with the legal-accounting fraternity with regard to the movement of contributions and the operation of superannuation funds within Australia. This will no doubt have a greater working benefit for all involved with this issue from the bankruptcy area to the Family Court arena. The balanced approach of this bill should also be commended.

Whilst superannuation contributions of a potential bankruptee are being reviewed in a fair and just manner by this bill, rural grants and assistance programs designed to support the day-to-day living of this vulnerable area of our community are protected; therefore, protecting the families and dependants of individuals against destitution and an inability to provide the absolute basics for their dependants.

Overall, on reviewing the amendments proposed in this bill, it is clear that the bill provides a clear and just method for dealing with superannuation contributions of a potential bankruptee that are diverted from creditors with the intent to defeat creditors. It will allow the trustee to recover contributions made by a person, other than the bankruptee, and to be examined as part of the possible ‘out of character’ ruling against the bankrupt. It will ensure that consideration given by the superannuation trustee to the contribution will be ignored in determining whether the contribution is recoverable by the trustee. It will allow for a fair and just review of the bankrupt’s intent through a historic review of contributions and advice provided by his or her financial adviser. It will ensure the fund is not at risk of costs and charges lost due to any payments made on behalf of the fund. It will provide safeguards against the bankrupt moving his or her superannuation funds through continual transfer of the contributions from fund to fund. It will ensure that superannuation payments have the same rights in a bankruptcy case as any other payments, thus providing a fair playing field between a creditor and a bankrupt.

The bill will ensure a level of humanity, with the protection of some rural grants and support to the bankrupt against being part of the creditors pool.

Finally, the amendments and those technical changes identified in the bill will improve the operation of the act as a whole and the ability for all parties to participate together in a more effective manner. I commend this bill to the House.

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