Richard Colbeck (Tasmania, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to the government amendments to be moved to this bill.

Linda Reynolds (WA, Liberal Party, Assistant Minister for Home Affairs) Share this | Link to this | Hansard source

by leave—I move government amendments (1) to (36) on sheet JC502 together:

(1) Clause 2, page 2 (table items 2, 4, 5, 8 and 10), omit "6 months", substitute "9 months".

(2) Clause 2, page 2 (at the end of the table), add:

(3) Schedule 1, items 1 to 3, page 4 (lines 6 to 14), omit the items, substitute:

1 Paragraph 185C(2 ) ( c)

Omit "being the Official Trustee, a registered trustee or another person", substitute "being a person who is the Official Trustee, a registered trustee or a registered debt agreement administrator and who is not the debtor".

2 Subsection 185E(1)

Repeal the subsection.

3 Paragraph 185E(2 ) ( a)

After "(2B),", insert "(2D), (2DA),".

3A Paragraph 185E(2 ) ( b)

Repeal the paragraph.

3B Subsections 185E(2A), (2B) and (2C)

Repeal the subsections.

3C Subsection 185Y(1)

Omit "(1)".

3D Subsection 185Y(2)

Repeal the subsection.

(4) Schedule 1, item 5, page 4 (line 20), omit "6 months", substitute "3 months".

(5) Schedule 1, item 20, page 9 (line 7), before "the amount", insert "if subsection (2AB) does not apply to the debtor—".

(6) Schedule 1, item 20, page 9 (line 9), after "subsection (4B)", insert "(unless subsection (4C) applies to the debtor)".

(7) Schedule 1, item 20, page 9 (line 10), omit the formula, substitute:

(8) Schedule 1, item 21, page 9 (lines 11 to 15), omit the item, substitute:

21 After subsection 185C(4A)

Insert:

(4B) The Minister may, by legislative instrument, determine the following:

(a) a percentage for the purposes of paragraph (4) (e) (which may exceed 100%);

(b) an amount for the purposes of the definition of low income debtor amount in subsection (5).

(4C) This subsection applies to the debtor if:

(a) the amount worked out using the formula under paragraph (4) (e) (expressed as a percentage) exceeds the percentage determined in an instrument under subsection (4B); and

(b) the proposed administrator gives to the debtor a certificate signed by the proposed administrator stating that, having regard to:

  (i) the circumstances in existence at the time when the debtor's statement of affairs was signed by the debtor; and

  (ii) any other relevant matters;

the proposed administrator is satisfied that the debtor is likely to be able to discharge the obligations created by the agreement as and when they fall due.

(4D) A person commits an offence of strict liability if:

(a) the person gives a certificate under paragraph (4C) (b); and

(b) before giving the certificate, the person did not:

  (i) make reasonable inquiries about the debtor's financial situation; or

  (ii) take reasonable steps to verify the debtor's financial situation.

Note: See also section 277B (about infringement notices).

Penalty: 60 penalty units.

21A Subsection 185C(5)

Insert:

low income debtor amount means the amount determined in an instrument under subsection (4B) for the purposes of this definition.

21B After subsection 185LG(1)

Insert:

(1A) Before a person signs a certificate under paragraph 185C(4C) (b) in relation to a debt agreement proposal, the person must:

(a) make reasonable inquiries about the debtor's financial situation; and

(b) take reasonable steps to verify the debtor's financial situation.

For the purposes of this Act, the requirements set out in paragraphs (a) and (b) are taken to be duties of an administrator in relation to a debt agreement.

21C Subsection 185LG(2)

After "subsection 185C(2D)", insert "or paragraph 185C(4C) (b)".

21D Subsection 277B(2) (after table item 5)

Insert:

(9) Schedule 1, item 26, page 11 (lines 7 to 9), omit the item, substitute:

26 Subsection 185C(2D)

Omit "If the person specified under paragraph (2) (c) is not the debtor, the", substitute "The".

(10) Schedule 1, item 30, page 11 (lines 18 and 19), omit the item, substitute:

30 Paragraph 185C(2D ) ( c)

Before "having regard", insert "if subsection (4C) does not apply to the debtor—stating that,".

(11) Schedule 1, page 12 (after line 10), after item 33, insert:

33A After subsection 185C(2D)

Insert:

(2DA) If subsection (4C) applies to the debtor, the debt agreement proposal given to the Official Receiver must also be accompanied by the certificate under paragraph (4C) (b).

(12) Schedule 1, item 38, page 12 (line 23), omit "any", substitute "the".

(13) Schedule 1, item 38, page 12 (line 23), after "185C(2D)", insert ", and any certificate under paragraph 185C(4C) (b),".

(14) Schedule 1, item 39, page 13 (lines 1 and 2), omit subsection 185EA(5).

(15) Schedule 1, item 40, page 13 (lines 10 and 11), omit subsection 185EC(1B).

(16) Schedule 1, item 41, page 13 (line 20), omit "a view to", substitute "the intention of".

(17) Schedule 1, item 41, page 13 (line 22), omit "3", substitute "6".

(18) Schedule 2, items 1 to 3, page 14 (lines 4 to 20), omit the items, substitute:

1 After subsection 185C(2)

Insert:

(2AA) A debt agreement proposal must not provide for the debtor to make payments under the agreement, in respect of provable debts in relation to the agreement, after:

(a) 3 years beginning on the day the agreement is made; or

(b) if subsection (2AB) applies to the debtor—5 years beginning on the day the agreement is made.

Note: Section 185H deals with when a debt agreement is made.

(2AB) This subsection applies to the debtor if at the time the debtor gives the debt agreement proposal to the Official Receiver the debtor has an interest in real property in Australia that is a dwelling and is the debtor's principal place of residence, being an interest:

(a) that is an interest under a long-term lease; or

(b) that is any other legal or equitable estate or interest, except:

  (i) an interest under a lease (other than a long-term lease); or

  (ii) an interest under a licence; or

  (iii) a life interest; or

  (iv) an interest in an easement; or

  (v) an interest held on trust for another person; or

  (vi) an interest of a kind determined in an instrument under subsection (2AD) for the purposes of this subparagraph.

(2AC) If, in accordance with subsections (2AA) and (2AB), a debt agreement proposal provides for the debtor to make payments under the agreement, in respect of provable debts in relation to the agreement, after 3, but not after 5, years beginning on the day the agreement is made, the property identified under paragraph (2) (a) must not include any interest covered by subsection (2AB).

(2AD) The Minister may, by legislative instrument, determine a kind of interest for the purposes of subparagraph (2AB) (b) (vi).

2 Subsection 185C(5)

Insert:

lease includes a sublease.

long -term lease means a lease granted by the Commonwealth, a State or a Territory for a term (including any extension or renewal) that is reasonably likely, at the time the lease is granted, to exceed 20 years.

3 Paragraph 185E(2 ) ( a)

After "185C(2),", insert "(2AA), (2AC),".

3A After subsection 185M(1C)

Insert:

(1D) The proposal must not seek to vary the agreement so that the agreement would provide for the debtor to make payments under the agreement, in respect of provable debts in relation to the agreement, after:

(a) 3 years beginning on the day the agreement was made; or

(b) if subsection (1DA) or (1DB) applies—5 years beginning on the day the agreement was made.

Note: Section 185H deals with when a debt agreement is made.

(1DA) This subsection applies if subsection 185C(2AB) applied to the debtor at the time the relevant debt agreement proposal was given to the Official Receiver.

(1DB) This subsection applies if:

(a) the proposal given to the Official Receiver is accompanied by a certificate signed by the administrator of the agreement stating that the administrator has reasonable grounds to believe:

  (i) that the debtor has suffered a substantial change in circumstances after the agreement was made that was not foreseen at the time the agreement was made; and

  (ii) that the debtor is not likely to be able to discharge the obligations created by the agreement as and when they fall due because of that change; and

(b) the proposal does not increase the total of the payments that the debtor would be required to make under the agreement.

(19) Schedule 2, item 6, page 16 (line 5), after "under", insert "paragraph 185M(1DB) (a) or".

(20) Schedule 2, item 7, page 16 (line 9), omit "subsection185M(1D)", substitute "subsection185M(1DB)".

(21) Schedule 2, item 7, page 16 (lines 11 to 17), omit subsection 185M(1E), substitute:

(1E) If:

(a) subsection 185C(2AB) did not apply to the debtor at the time (the proposal time) the relevant debt agreement proposal was given to the Official Receiver; and

(b) a person did not give a certificate under paragraph 185C(4C) (b) in relation to the relevant debt agreement proposal;

the proposal under subsection (1) of this section must not seek to vary the agreement so that the amount worked out using the following formula (expressed as a percentage) exceeds the percentage in effect under an instrument under subsection 185C(4B) at the proposal time:

(22) Schedule 2, item 7, page 16 (lines 18 to 20), omit "If the administrator of the agreement is not the debtor, the proposal given to the Official Receiver must be accompanied by a certificate signed by the administrator", substitute "The proposal given to the Official Receiver must be accompanied by a certificate signed by the administrator of the agreement".

(23) Schedule 2, item 9, page 17 (lines 3 to 6), omit subsection 185M(2A), substitute:

(2A) However, the Official Receiver is not required by subsection (2) to process the proposal if:

(a) the Official Receiver reasonably believes that complying with the agreement (as proposed to be varied) would cause undue hardship to the debtor; or

(b) the Official Receiver thinks that the creditors' interests would be better served by not processing the proposal.

(24) Schedule 2, item 10, page 17 (line 22), omit subsection 185MA(5).

(25) Schedule 2, item 11, page 17 (line 30), omit subsection 185MC(1B).

(26) Schedule 2, item 12, page 18 (line 8), omit "a view to", substitute "the intention of".

(27) Schedule 2, item 12, page 18 (line 11), omit "3", substitute "6".

(28) Schedule 2, item 13, page 18 (lines 32 and 33), omit "Subsections 185MC(1A) and (1B) of the Bankruptcy Act 1966, as inserted by this Part, apply", substitute "Subsection 185MC(1A) of the Bankruptcy Act 1966, as inserted by this Part, applies".

(29) Schedule 2, item 14, page 20 (line 10), omit subsection 185PA(5).

(30) Schedule 2, item 15, page 20 (line 18), omit subsection 185PC(1B).

(31) Schedule 2, item 16, page 20 (line 26), omit "a view to", substitute "the intention of".

(32) Schedule 2, item 16, page 21 (line 1), omit "3", substitute "6".

(33) Schedule 2, item 17, page 21 (lines 9 and 10), omit "Subsections 185PC(1A) and (1B) of the Bankruptcy Act 1966, as inserted by this Part, apply", substitute "Subsection 185PC(1A) of the Bankruptcy Act 1966, as inserted by this Part, applies".

(34) Schedule 2, item 32, page 26 (lines 26 and 27), omit the item, substitute:

32 Subsection 277B(2) (after table item 6)

Insert:

(35) Schedule 3, page 29 (after line 21), after item 2, insert:

2A Subsection 186A(2)

Omit "Subparagraph (1) (a) (i)", substitute "Paragraph (1) (a)".

(36) Page 43 (after line 3), at the end of the Bill, add:

Schedule 6—Other amendments

Bankruptcy Act 1966

1 Section 60 -21 of Schedule 2

Repeal the section, substitute:

60 -21 Inducements to be appointed as trustee

A person (the first person) commits an offence if:

(a) the first person gives, or agrees or offers to give, to another person any valuable consideration; and

(b) the first person does so with the intention of:

  (i) securing the first person's appointment or nomination as a trustee of a regulated debtor's estate; or

  (ii) securing or preventing the appointment or nomination of a third person as a trustee of a regulated debtor's estate.

Penalty: Imprisonment for 6 months.

2 Application provision

The amendment made by item 1 applies in relation to conduct engaged in on or after the commencement of that item.

Bankruptcy (Estate Charges) Act 1997

3 Subsection 6(1B)

Repeal the subsection.

4 Saving provision

Despite the repeal of subsection 6(1B) of the Bankruptcy (Estate Charges) Act 1997 made by this Schedule, that subsection, as in force immediately before the commencement of this item, continues to apply on and after that commencement in relation to the following:

(a) debt agreements that were in force immediately before that commencement;

(b) debt agreements that come into force on or after that commencement, where the debt agreement proposals were given before that commencement.

The amendments on JC502 address issues raised by the Senate Scrutiny of Bills Committee and the Legal and Constitutional Affairs Legislation Committee and also facilitates the intended operation of the bill. The amendments give people with a family home a better opportunity to avoid bankruptcy and keep control of their home. The amendments also ensure that the protections afforded by the bill's payment-to-income ratio and the three-year proposal cap are better targeted at vulnerable debtors. I will outline the amendments on JC502.

Amendments (1) and (4) lengthen the commencement of most of the bill's provisions from six to nine months post the royal assent. This extension is in recognition of the technical complexity of the amendments proposed in this bill which will require additional time to ensure the ICT systems of the regulator, the Australian Financial Security Authority, are fully operational on commencement.

Amendments (2), (16), (26), (31) and (36) modify description of intent. These amendments modify the description of the fault element of applicable offences in the bill and the Bankruptcy Act 1966 from 'with a view to' to 'with the intention of'. The bill also introduces offences for debt agreement administrators that offer to give inducements to creditors to influence a debt agreement vote. These amendments ensure the framing of these offences introduced by the bill and the similar offences at section 60-21 of schedule 2 of the Bankruptcy Act 1966 are consistent with the Criminal Code Act 1995.

Amendments (2), (3), (9), (12), (14), (15), (22), (24), (25), (28), (29), (30), (36) and (33) prohibit self-administered debt agreements. These amendments expressly prohibit debtors from proposing to self-administer their own debt agreements. To ensure all debtors receive the benefit of an appropriately qualified debt agreement administrator, the bill mandates that only a registered debt agreement administrator, a registered trustee or the official trustee can be authorised to administer a debt agreement. The requirement for registration as a debt agreement administrator or trustee under the Bankruptcy Act 1966 prevents self-administered debt agreements from being established. Therefore, for clarity, and to prevent administrative inefficiencies, the amendments expressly prohibit the proposal of self-administered debt agreements.

Amendments (3), (6), (8), (10), (11), (13), (21) and (34), from the Scrutiny of Bills Committee, relate to the payment-to-income ratio. These particular amendments respond to the Scrutiny of Bills Committee query as to whether the Attorney-General should retain the power to alter the eligibility requirements for debt agreements. The bill allows the Attorney-General to alter the eligibility requirements for debt agreements through amending their permissible payment-to-income ratio. The introduction of this ratio will provide an important safeguard, ensuring debtors are not able to enter into repayment obligations that are unsustainable. This allows the Attorney-General to initially set and then amend the permissible level of this ratio, which is also important as it allows the ratio to be quickly amended to adjust to changing market conditions. However, taking on board the committee's comments, these amendments reduce the scope of debt agreements to which the ratio will apply and thereby limit the Attorney-General's ability to set the eligibility requirements. The amendments will allow debtors to exceed the payment-to-income ratio if their financial situation is subjected to heavier scrutiny by their administrator and the administrator concludes the proposed repayments are sustainable. A 60-penalty-unit strict liability offence applies to administrators that abuse this option.

Amendments (5), (18) and (21) relate to debtors with a home to protect. In recognition of the fact that debtors with a home to protect stand to lose more under bankruptcy than other debtors, this amendment relaxes the debtor protection safeguards of the three-year debt agreement time frame limitation and the payment-to-income ratio. Together amendments (5), (18) and (21) give debtors with equity in their principal place of residence the flexibility to exceed the payment-to-income ratio and to propose a debt agreement of up to five years. These amendments extend the accessibility of the debt agreement system and provide debtors with a home to protect a viable alternative to bankruptcy.

Amendments (7), (8) and (21) respond to the Legal and Constitutional Affairs Legislation Committee recommendations that the cost of living for low-income households, the average cost of housing and the potential CPI increases be considered when setting the payment-to-income ratio. Therefore these amendments will modify the payment-to-income ratio formula to introduce a low-income debtor amount to the numerator so it can better take into account the circumstances of low-income debtors, who may be more vulnerable to financial stress. By adding a low-income debtor amount, the formula better accounts for two things—firstly, low-income debtors, who generally spend a high proportion of their income on basics, and, secondly, debtors who have atypical circumstances such as those receiving assistance from employers or family.

Amendment (17), (27), (32) and (36) respond to queries raised by the Scrutiny of Bills Committee. The bill and section 60-21 of schedule 2 of the Bankruptcy Act 1966 include offences of three months imprisonment for commercial misconduct. These amendments increase these penalties to six months imprisonment to achieve consistency with principles in the guide on framing Commonwealth offences. The government considers that six months imprisonment is an appropriate punishment for commercial misconduct which unfairly disadvantages some creditors over other creditors.

Amendments (18), (19), (20) and (23) will allow debtors to vary their debt agreements by up to five years in total if they suffer a substantial and unforeseen change in circumstances after the agreement has been established that is likely to prevent them from completing their debt agreement. These amendments respond to the Legal and Constitutional Affairs Legislation Committee recommendation that the bill be amended to allow for debt agreements implemented under a three-year cap to be capable of being extended by up to an additional two years, by agreement of the debtor, creditor and debt agreement administrator. The amendments' requirement for a substantial and unforeseen change in the circumstances preserves the debtor protection safeguard of the three-year limitation on debt agreement proposals while introducing some flexibility to ensure debtors are not unfairly disadvantaged due to an unanticipated setback. Finally, amendment (35) corrects an erroneous reference in subsection 186A(2) of the Bankruptcy Act 1966 which gives administrators an exception to satisfying the basic eligibility test.

Claire Moore (Queensland, Australian Labor Party, Shadow Minister for Women) Share this | Link to this | Hansard source

Labor supports the amendments. We worked very closely with the government in the last period and we think that the amendments support the bill very strongly.

Progress reported.