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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
BANKRUPTCY AMENDMENT (ENTERPRISE INCENTIVES) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the Attorney-General, the Hon George Brandis QC)
BANKRUPTCY AMENDMENT (ENTERPRISE INCENTIVES) BILL 2017
GENERAL OUTLINE
1. This Bill amends the Bankruptcy Act 1966.
2. The Bill contains measures to implement significant reforms to Australia's
bankruptcy laws by reducing the default period of bankruptcy from three years to one year.
Other time periods associated with bankruptcy will also be reduced to one year. These
include disclosure of bankrupt status when applying for credit, seeking permission for
overseas travel and the attainment of certain licences and entering into certain professions.
3. The Bill contains measures that extend income contribution obligations for discharged
bankrupts for a minimum period of two years following discharge or, in the event that a
bankruptcy is extended due to non-compliance, for five to eight years. The measures in the
Bill are also designed to:
ensure personal insolvency practitioners are able to adequately and
appropriately administer a bankruptcy by ensuring that persons who are under
an obligation to notify change in contact details continue to do so
ensure credit providers continue to have sufficient personal insolvency
information to accurately assess an individual's creditworthiness, and
maintain the integrity of the regulatory and enforcement frameworks under
which the Australian Financial Security Authority operates.
4. As part of the National Innovation and Science Agenda these reforms aim to foster
entrepreneurial behaviour and to reduce the stigma associated with bankruptcy. Reducing the
automatic discharge to one year will reduce stigma, encourage entrepreneurs to re-engage in
business sooner and encourage people, who have previously been deterred by the punitive
bankruptcy laws, to pursue their own business ventures.
DATE OF EFFECT
5. The commencement of these amendments would occur six months after Royal Assent
to allow trustees, debtors and creditors time to adjust to the new arrangements. In particular,
this will give trustees time to prepare any objections to discharge, and will enable relevant
agencies time to consider whether a one-year licensing or professional restriction is
appropriate for their purposes.
PROPOSAL ANNOUNCED
6. The bankruptcy reforms were announced on 7 December 2015. Public consultation on
the proposals occurred between 29 April 2016 to 27 May 2016 as part of the National
Innovation and Science Agenda 'Improving bankruptcy and insolvency laws' proposals
paper.
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FINANCIAL IMPACT
7. The Bill is deregulatory in nature and will result in savings of approximately $4
million per annum from commencement.
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GLOSSARY
8. The following abbreviations are used throughout this explanatory memorandum.
Abbreviation Definition
Amending Act Bankruptcy Amendment (Enterprise
Incentives) Act 2017
Bankruptcy Act Bankruptcy Act 1966
Bill Bankruptcy Amendment (Enterprise
Incentives) Bill 2017
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STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Bankruptcy Amendment (Enterprise Incentives) Bill 2017
9. The Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
10. The Bill will amend the Bankruptcy Act to reduce the default period of bankruptcy
from three years to one year. The aim of the Bill is to foster entrepreneurial behaviour and
reduce the stigma associated with bankruptcy whilst maintaining the integrity of the
regulatory and enforcement frameworks for the personal insolvency regime.
Human rights implications
11. The amendments would have no impact on specific provisions of any human rights
instruments.
Conclusion
12. The Bill is compatible with human rights.
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NOTES ON CLAUSES
Preliminary
Clause 1 - Short title
13. Clause 1 provides for the short title of the Act to be the Bankruptcy Amendment
(Enterprise Incentives) Act 2017.
Clause 2 - Commencement
14. Clause 2 provides for the commencement of each provision in the Bill, as set out in
the table.
15. Item 1 in the table provides that sections 1 to 3 of the Amending Act will commence
on the day the Amending Act receives Royal Assent.
16. Item 2 in the table provides that Schedule 1 of the Amending Act will commence six
months after Royal Assent.
Clause 3 - Schedules
17. Clause 3 provides that the legislation specified in a Schedule to the Amending Act is
amended or repealed as set out in the Schedule.
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Schedule 1 - Amendments to the Bankruptcy Act 1966
GENERAL OUTLINE
18. A single schedule (Schedule 1) is included with the Bill. The amendments in
Schedule 1will modify various sections of the Bankruptcy Act so that the default period of
bankruptcy can be reduced from three years to one year.
19. Part 1 of Schedule 1 reduces the default period of bankruptcy to one year. As part of
the reduction in this default period, other time periods associated with bankruptcy are also
reduced to one year. These include disclosure of bankrupt status when applying for credit,
seeking permission for overseas travel and the attainment of certain licences and entering
into certain professions.
20. The amendments clarify that income contribution obligations for discharged
bankrupts extend for a minimum period of two years following discharge or, in the event that
a bankruptcy is extended due to non-compliance, for a period of five to eight years. The
amendments ensure that persons who are under an obligation to notify change in contact
details continue to do so.
21. Part 2 of Schedule 1 clarifies how the amendments, once introduced, apply to persons
who are currently undischarged bankrupts.
Part 1 -- Amendments
Item 1 - At the end of subsection 59(1)
22. Section 59 of the Bankruptcy Act deals with the effect of second and subsequent
bankruptcies which occur when the bankrupt is not yet discharged from an earlier
bankruptcy. Section 59 currently provides that property of the bankrupt that was acquired or
transferred to the bankrupt on or after the date of the earlier bankruptcy, and which has not
been distributed amongst creditors in the earlier bankruptcy before the date on which the
person became a bankrupt on the later occasion, vests in the trustee in the later bankruptcy.
23. Under paragraph 59(1)(c) the trustee of the first or earlier bankruptcy is deemed to be
a creditor in the later bankruptcy in respect of the unpaid balance of expenses or
remuneration and the liabilities incurred in respect of administration and the debts proved in
the earlier bankruptcy. In these circumstances, a trustee in the earlier bankruptcy ranks
equally with the ordinary unsecured creditors in the later bankruptcy.
24. Bankrupts are obligated to pay income contributions until discharge where their
income exceeds the prescribed threshold (currently $55,446.30 for bankrupts without any
dependants) under sections 139P and 139Q of the Bankruptcy Act.
25. Item 1 of Schedule 1 extends the application of section 59(1) to apply to income
contributions by inserting new subsection (f). This amendment provides that where a person
who is a bankrupt becomes a bankrupt again, the income contribution obligations arising out
of a first bankruptcy will cease and the contribution assessment period for the first
bankruptcy will come to an end. This amendment ensures consistency with the
administration of existing debts that have not been met in a bankruptcy where there is a
subsequent bankruptcy.
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Item 2 - At the end of section 59
26. Item 2 of Schedule 1 inserts subsection 59(7) which ensures that ceasing income
contributions to a trustee in an earlier bankruptcy in the event of a second bankruptcy, as
referred to in new paragraph 59(1)(f), does not limit the ability of the trustee in the later
bankruptcy to exercise the powers that would have been available to the trustee in the earlier
bankruptcy with respect to contribution assessment periods.
Item 3 - Section 80 (heading)
27. Item 3 of Schedule 1 repeals the current heading of section 80 and replaces it with
"Notification of change in contact details". This wording is more accurate and succinct than
the existing heading 'Notification of change in name, address or day-time telephone
number'.
Item 4 - Subsection 80(1)
28. Subsection 80(1) currently requires bankrupts to immediately notify the trustee of a
change to their name or principle place of residence. Failure to do so involves a penalty of
imprisonment for 6 months.
29. Item 4 of Schedule 1 repeals subsection 80(1) and replaces it with the requirement for
the bankrupt to notify the trustee within 10 business days of changes to their name, address
and phone number during the 'prescribed period'. Failure to do so will still involve a penalty
of imprisonment for 6 months. Item 5 of Schedule 1 inserts a definition of the 'prescribed
period' to capture any circumstance when a bankrupt is required to make income
contribution payments.
30. This amendment will support the administration of income contribution payments by
ensuring the trustee remains informed of changes in contact details for the entire period a
bankrupt is obligated by Division 4, and provides a clear and realistic timeline for the
bankrupt to notify the trustee.
Item 5 - At the end of section 80
31. Item 5 of Schedule 1 inserts a new definition of bankrupt (to apply to section 80 only)
to include people who have been discharged from bankruptcy. This amendment will extend
the requirement to notify the trustee of changes to name, address and phone number during
the 'prescribed period' to include people who have been discharged from bankruptcy.
32. Item 5 of Schedule 1 also provides a definition for the 'prescribed period' (to apply to
section 80 only) to capture any circumstance when a bankrupt is required to make income
contributions payments.
Item 6 - Paragraph 139J(a)
33. Section 139J provides the objects of Part VI Division 4B. The Division's object in
paragraph 139J(a) currently requires income contribution payments from bankrupts who
derive income during the bankruptcy.
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34. Item 6 of Schedule 1 replaces the phrase 'during the bankruptcy' with 'during a
period after becoming bankrupt'. This will ensure that the object accurately reflects the aims
of the new provisions in Part VI Division 4B which will require discharged bankrupts, who
are assessed as eligible to make payments during a contribution assessment period, to
continue to make income contribution payments to the bankrupt estate. This will ensure that
high income earners do not abuse bankruptcy laws by reducing their income for a year,
hiding their assets, accruing excessive debt and only being subject to contributions for a one
year period.
35. Reforms to the Bankruptcy Act in 1992 included the introduction of income
contributions in Part VI Division 4B of the Bankruptcy Act. These provisions were aimed at
addressing situations where bankrupts earned large incomes after bankruptcy but were not
required to make any repayment to creditors from that income.
36. Under Part VI Division 4B, a trustee in bankruptcy can make an assessment of the
income likely to be derived by the bankrupt during a contribution assessment period. A
contribution assessment period is an annual period beginning from the commencement of
bankruptcy and on each anniversary of that commencement before the bankrupt is
discharged or the debts of the bankrupt are paid in full. Where the debts are paid in full, the
bankruptcy is annulled by operation of law.
37. In making an assessment of the bankrupt's likely income, or income derived during a
period, the trustee can have regard to any information about the bankrupt's employment or
income, whether provided by the bankrupt or some other person. Persons whose assessed
income is below the proposed threshold are not liable to make compulsory contributions, but
may do so voluntarily.
Item 7 - Section 139K
38. Section 139K provides definitions for Part VI Division 4B. Division 4B requires
bankrupts, who are assessed as eligible to make payments during a contribution assessment
period, to make income contribution payments to the bankrupt estate.
39. Item 7 of Schedule 1 inserts a new definition of bankrupt (to apply to
Part VI Division 4B only) to include people who have been discharged from bankruptcy.
This amendment will extend the requirement to make income contribution payments under
Part VI Division 4B to capture persons who are eligible to make these payments, but have
been automatically discharged after one year.
Item 8 - Section 139K (definition of contribution assessment period)
40. Item 8 of Schedule 1 repeals the existing definition of 'contribution assessment
period' and inserts a new definition to ensure that a bankrupt, or discharged bankrupt, will,
ordinarily, be liable for income contributions for at least three contribution assessment
periods. There will be one contribution assessment period during the period of bankruptcy
and at least two contribution assessment periods after the discharge from bankruptcy. Even
if a bankrupt does not earn income over the threshold during their one year bankruptcy, this
person will be subject to income contributions if their income rises above the threshold in the
two years following discharge.
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41. Under the current definition the contribution assessment periods cease when a
bankrupt is discharged or the bankruptcy is annulled. The new definition provides that all
contribution assessment periods will come to an end after three years or when the bankruptcy
is discharged, whichever occurs later. This enables contribution assessment periods to extend
beyond three years in circumstances where the bankruptcy has been extended through a
trustee or Official Receiver's objection pursuant to section 149B.
42. This amendment to section 139K will prevent high income earners from abusing
bankruptcy laws by reducing their income for a year, hiding their assets, accruing excessive
debt and only being subject to contributions for a one year period.
Items 9 and 10 - Section 139L
43. Section 139K provides definitions for Part VI Division 4B. Division 4B requires
bankrupts, who are assessed as eligible to make payments during a contribution assessment
period, to make income contribution payments to the bankrupt estate.
44. Item 7 of Schedule 1 inserts a new definition of bankrupt (to apply to Part VI Division
4B only) to include people who have been discharged from bankruptcy. This amendment
will extend the requirement to make income contribution payments under Part VI
Division 4B to capture persons who are eligible to make these payments, but have been
automatically discharged after one year.
45. Section 139L provides the definition of income for the purposes of determining
income contribution payments under Part VI Division 4B. Subsection 139L(2) currently
provides a definition of bankrupt to be used when interpreting the definition of income
contained at subsection 139L(1).
46. The amendments contained in item 7 of Schedule 1 will result in subsection 139L(2)
being redundant, as subsection 139L(2) sits within Part VI Division 4B and contains the
same definition as the amended new section 139K. To avoid replication, item 10 will repeal
subsection 139L(2) (including the note), and item 9 will omit the reference to subsection (1)
as section 139L will no longer require separate subsections.
Item 11 - Section 139R
47. Part VI Division 4B requires bankrupts, who are assessed as eligible, to make income
contribution payments to the bankrupt estate during the contribution assessment periods.
Section 139P sets out the liability of bankrupts to make those payments. Section 139Q
provides adjustment for the liability of the bankrupt in circumstances where the actual
income derived is greater or less than the amount predicted by the trustee under the initial
assessment.
48. Section 139R ensures that any liability to pay contributions pursuant to section 139P
or 139Q is not affected by discharge. Therefore, if a bankrupt currently has an outstanding
income contribution liability under section 139P or 139Q, this continues to be an outstanding
liability even in the event of discharge.
49. Provisions contained in the Bill will extend the contribution assessment period, in
most cases, past the point of discharge. Accordingly, item 11 substitutes a new section 139R
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to ensure that any liability of a bankrupt to pay income contributions under section 139P or
139Q is not affected by discharge or the expiration of any contribution assessment period.
Item 12 and 13 - Subsection 139WA(2)
50. Section 139K provides definitions for Part VI Division 4B. Division 4B requires
bankrupts, who are assessed as eligible to make payments during a contribution assessment
period, to make income contribution payments to the bankrupt estate.
51. Item 7 of Schedule 1 inserts a new definition of bankrupt (to apply to
Part VI Division 4B only) to include people who have been discharged from bankruptcy.
This amendment will extend the requirement to make income contribution payments under
Part VI Division 4B to capture persons who are eligible to make these payments, but have
been automatically discharged after one year.
52. Section 139WA provides for circumstances when an assessment of a bankrupt's
income and contribution under section 139W can be made. Subsection 139WA(2) currently
provides a definition of bankrupt to be used when applying section 139WA.
53. The amendments contained in item 7 of Schedule 1 will result in subsection
139WA(2) being redundant, as subsection 139WA(2) sits within Part VI Division 4B and
contains the same definition as the new section 139K. To avoid replication, item 13 will
repeal subsection 139WA(2). Item 12 will omit the reference to subsection (1) as section
139WA will no longer require separate subsections.
Item 14 - Section 139ZIB (definition of bankrupt)
54. Section 139K provides definitions for Part VI Division 4B. Division 4B requires
bankrupts, who are assessed as eligible to make payments during a contribution assessment
period, to make income contribution payments to the bankrupt estate.
55. Item 7 of Schedule 1 inserts a new definition of bankrupt (to apply to
Part VI Division 4B only) to include people who have been discharged from bankruptcy.
This amendment will extend the requirement to make income contribution payments under
Part VI Division 4B to capture persons who are eligible to make these payments, but have
been automatically discharged after one year.
56. Section 139ZIB provides the definitions for the purposes of the supervised account
regime in Subdivision HA, Part VI Division 4B. Section 139ZIB currently includes the
definition of bankrupt to be used when interpreting the definition of bankruptcy contained
within Subdivision HA, Part VI Division 4B.
57. The amendments contained in item 7 of Schedule 1 will result in the definition of
bankrupt in section 139ZIB being redundant, as section 139ZIB sits within Part
VI Division 4B and contains the same definition as the new section 139K. To avoid
replication, item 14 will repeal section 139ZIB.
Item 15 - Subsections 139ZIDA(2) and (3)
58. Pursuant to subsection 139ZIC(1) a trustee may determine, by notice, that a
supervised account regime applies to a bankrupt. The effect of the notice is that the bankrupt
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will be required to open a bank account into which all of the bankrupt's income is deposited
and withdrawals can only be made from the account with the trustee's permission. The
supervised account regime is a compliance mechanism that may be used when the bankrupt
is not meeting contribution assessment payments.
59. Currently, subsections 139ZIDA(2) and 139ZIDA(3) respectively provide that a
determination regarding the supervised account regime ceases upon discharge if no liability
payments are outstanding, or if payments are outstanding when the discharged bankrupt is no
longer liable to pay a contribution.
60. Item 15 of Schedule 1 will repeal subsections 139ZIDA(2) and 139ZIDA(3) and
insert new subsections 139ZIDA(2) and 139ZIDA(3). These amendments will ensure that
determinations regarding supervised account regimes apply post discharge and throughout
the contribution assessment periods, and only cease when the bankrupt is no longer liable to
pay a contribution. This enables the supervised account regime to continue to be used as a
compliance mechanism to collect outstanding payments regardless of whether the person has
been discharged from bankruptcy or any contribution assessment periods have come to an
end.
Item 16 - Section 139ZIIA
61. Section 277A imposes obligations and duties on the bankrupt to keep and produce
books that record income derived by the bankrupt, details of the bankrupt's employment and
financial transactions or dealings conducted by the bankrupt.
62. Items 24-29 of Schedule 1 extend the obligations under section 277A to oblige
bankrupts discharged automatically after one year to keep and produce books during the
'prescribed period'. The definition of 'prescribed period' in new subsection 277A(5)
captures any circumstance when a bankrupt is required to make income contribution
payments.
63. Section 139ZIIA extends the obligations contained in section 277A in relation to a
discharged bankrupt who is subject to the supervised account regime.
64. Item 16 of Schedule 1 substitutes a new section 139ZIIA to ensure that where a
person is subject to the supervised account regime, the obligation imposed by section 277A
will continue until that regime ceases to apply, regardless of whether the prescribed period
has come to an end.
Item 17 - Section 139ZJ
65. Section 139K provides definitions for Part VI Division 4B. Division 4B requires
bankrupts, who are assessed as eligible to make payments during a contribution assessment
period, to make income contribution payments to the bankrupt estate.
66. Item 7 of Schedule 1 inserts a new definition of bankrupt (to apply to Part VI Division
4B only) to include people who have been discharged from bankruptcy. This amendment
will extend the requirement to make income contribution payments under Part VI Division
4B to capture persons who are eligible to make these payments, but have been automatically
discharged after one year.
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67. Section 139ZJ provides the definition of bankrupt for the purposes of the collection of
money or property by the Official Receiver from a person other than the bankrupt in
Subdivision I, Part VI Division 4B. Section 139ZJ provides for the definition of a bankrupt
to be used when interpreting Subdivision I, Part VI Division 4B.
68. The amendments contained in item 7 of Schedule 1 will result in the definition of
bankrupt in section 139ZJ being redundant, as section 139ZJ sits within Part VI Division 4B
and contains the same definition as the new section 139K. To avoid replication, item 17 will
repeal the definition of bankrupt in section 139ZJ.
Item 18 - Subsection 149(4)
69. Section 149 provides for the amount of time that must pass before an automatic
discharge from bankruptcy will occur.
70. Item 18 of Schedule 1 amends subsection 149(4) to apply an automatic discharge after
three years from the date on which the bankrupt filed his or her statement of affairs if the
bankruptcy occurs after the commencement of section 27 of the Bankruptcy Amendment Act
1991 and before the commencement of new subsection 149(5).
71. Notwithstanding the text of new subsection 149(4), all bankruptcies on foot at the
commencement of the Amending Act will be discharged if they are over a year old pursuant
to the transitional provisions at item 30 of Schedule 1. The amendment to subsection 149(4)
merely provides for the 'closing off' of the rule under that subsection that the period of
bankruptcy, since the commencement of section 27 of the Bankruptcy Amendment Act 1991,
will be three years.
Item 19 - Section 149
72. Section 149 provides for the amount of time that must pass before an automatic
discharge from bankruptcy will occur.
73. Item 19 of Schedule 1 inserts a new subsection (5) that will provide for an automatic
discharge after one year of bankruptcy to apply to persons who become bankrupt after the
commencement of subsection 149(5).
74. After discharge certain restrictions such as overseas travel, obtaining credit and
company board eligibility will be lifted. Reducing the automatic discharge to one year will
reduce stigma, encourage entrepreneurs to re-engage in business sooner and encourage
people, who have previously been deterred by the punitive bankruptcy laws, to pursue their
own business ventures.
Items 20-22 - Section 149A
75. Section 149B provides the trustee or Official Receiver an opportunity to object to the
section 149 automatic discharge from bankruptcy on grounds provided in section 149D. The
ability to object to an automatic discharge ensures the bankrupt cooperates during the
bankruptcy and is aimed to provide a safeguard against bankrupts who may continue to act
in financially irresponsible ways after discharge.
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76. Section 149A extends the period of bankruptcy if an objection to the discharge of a
bankrupt has taken effect in accordance with section 149G. Items 20 to 22 of Schedule 1
insert references to new subsection 149(5) and ensure that section 149A applies to the one
year automatic discharge. These amendments will provide safeguards to extend a
bankruptcy, if appropriate, despite the reduced default period of bankruptcy.
Item 23 - At the end of section 265
77. Section 265 imposes obligations and duties on a bankrupt in respect of disclosing
property and other information. Item 23 of Schedule 1 inserts provisions that extend the
duties and penalties contained in section 265 to a person who has been discharged from
bankruptcy for 'the prescribed period'. The new definition of 'prescribed period' captures
any circumstance when a bankrupt is required to make income contributions payments.
78. Accordingly, a bankrupt discharged automatically after one year must continue to
comply with obligations in section 265 throughout the period they are obliged to make
income contribution payments in order for the trustee to gain important information relevant
to the contribution assessment period.
Items 24-29 - Section 277A
79. Section 277A imposes obligations and duties on the bankrupt to keep and produce
books that record income derived by the bankrupt, details of the bankrupt's employment and
financial transactions or dealings conducted by the bankrupt.
80. Items 24-29 of Schedule 1 extend the obligations under section 277A to oblige
bankrupts discharged automatically after one year to keep and produce books during the
'prescribed period'. The definition of 'prescribed period' in new section 277A captures any
circumstance when a bankrupt is required to make income contribution payments.
81. These amendments will ensure that all bankrupts are obligated to keep books and
other records in an accessible manner and allow the trustee or the Official Receiver to
request the production of books. This ensures the trustee or Official Receiver will have
access to appropriate information to administer the bankruptcy and determine if the bankrupt
is complying with obligations under the Bankruptcy Act.
Part 2 -- Application and transitional provisions
Item 30 - Application and transitional arrangements
82. The introduction of an automatic discharge after one year will require transitional
arrangements to ensure that all current and future bankrupts benefit from the introduction as
soon as possible. Item 30 of Schedule 1 will introduce the default one year bankruptcy
period on the commencement day (the day the Schedule comes into operation).
83. All bankruptcies on foot at the commencement date, except those subject to a section
149B objection, will be discharged if one year has expired since the bankrupt filed a
statement of affairs with the Official Receiver. Remaining bankruptcies will discharge on the
day after the first anniversary of the filing of the statement of affairs with the Official
Receiver. This approach will avoid the unfairness of a bankruptcy on foot under the old laws
being discharged years after a bankruptcy that starts under the new provisions contained in
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the Bill. It will also remove any incentives for individuals to delay petitioning for bankruptcy
as all bankruptcies filed after the commencement date will only run for one year.
84. Bankruptcies that have been extended to five or eight years before commencement of
Schedule 1 through a section 149B objection to discharge will remain unchanged. The ability
of the trustee or Official Receiver to lodge an objection under section 149B after the
commencement of Schedule 1 will not be affected. This is necessary a safeguard to address
bankrupts who may continue to act in financially irresponsible ways.
85. If an objection is withdrawn or cancelled pursuant to section 149N the bankrupt will
only be discharged if at least one year has expired since the filing of the statement of affairs
with the Official Receiver and the cancellation has taken effect subject to section 149N(2).
Section 149N(2) stipulates that cancellation of an objection cannot take effect until the end
of the period within which an application may be made to the Administrative Appeals
Tribunal (AAT) for the review of the decision, or if an application is made - the decision of
the AAT is given. Accordingly, despite a bankruptcy being over one year old and the
Inspector-General making a decision to cancel the objection under section 149N(1), a
bankrupt in these circumstances will not be discharged until the end of the period stipulated
in section 149N(2).
Item 31 - Transitional Rules
86. The introduction of an automatic discharge from bankruptcy after one year will
require transitional arrangements. New transitional matters, other than the provisions
contained at item 30 of Schedule 1, may arise on application of the default one year
bankruptcy period. Item 31 will allow the Minister, by legislative instrument, the power to
make rules prescribing matters of a transitional nature relating the amendments or repeals
made by the Bankruptcy Act. Item 31 of Schedule 1 is a standard provision contained in
transitional schemes and will allow for additional transitional rules to assist in giving effect
to the Bill, including dealing with transitional matters that were not foreseen when the Bill
was being drafted.
87. Item 31 of Schedule 1 inserts provisions which appropriately restrict the subject
matter the rules can prescribe, given the decreased scrutiny they are subject to when made.
The rules may not create an offence or civil penalty, provide powers of arrest or detention or
entry, search or seizure, impose a tax, set an amount to be appropriated from the
Consolidated Revenue Fund, or directly amend the text of the Bankruptcy Act.
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