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FAMILY LAW AMENDMENT BILL 2005

                          2004-2002-2003-2004-2005





               THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA





                       HOUSE OF REPRESENTATIVESSENATE






   BANKRUPTCY AND FAMILY LAW LEGISLATION FAMILY LAW AMENDMENT BILL  20054





                    SUPPLEMENTARY EXPLANATORY MEMORANDUM



    Amendments and New Clauses to be Mmoved on Bbehalf of the Government






              (Circulated by authority of the Attorney-General,
                      the Honourable Philip Ruddock MP)







         BANKRUPTCY AND FAMILY LAW LEGISLATION AMENDMENT BILL 20054



OUTLINE

The Bankruptcy and Family Law LegislationFamily Law Amendment Bill 20054
(the Bill) makes a number of diverse amendments to the makes a number of
significant changes to the Bankruptcy Act 1966 and the Family Law Act 1975
(the Act), implementing a number of key recommendations of the Joint
Taskforce Report on the Use of Bankruptcy and Family Law Schemes to Avoid
Payment of Tax (Joint Taskforce), mainly in the nature of procedural and
technical changes to clarify and improve the operation of the Act.

.

Thesese Government amendments amend section 66X in Part 14 of insert new
Schedule 5the Bill. in the Bill

Section 66X in Part 14 of the Bill allows the court to make orders for
recovery of payments made or property transferred by a person under a child
maintenance order, in circumstances where it is later found that the person
was not liable to support the child as they were not the child's biological
parent.

The Government amendments remove the amendments to subsection 66X(2) that
were passed by the Senate on a Democrat motion, and substitute Government
amendments to that subsection.

The Government amendments will allow the court to recognise that, while a
person seeking recovery of moneys paid or property transferred under a
child maintenance order is entitled to recovery of that money or property
if they are found not to be a parent or step-parent liable to support the
child, it might be appropriate in exceptional circumstances to reduce the
amount to be repaid, or the value of the property to be restored.

, amending the Family Law Act 1975 (the Family Law Act) in order to clarify
the rights of third party creditors in family law property matters, and to
require a separation declaration when certain binding financial agreements
are made.

As with the existing provisions of the Bill, these amendments are part of
the Government response to the Joint Taskforce recommendations.

The reason for the amendments is to consolidate all reforms relating to
family law and bankruptcy law interaction in the one Bill.  The amendments
were previously contained in Part 19 of the Family Law Amendment Bill 2004,
which was introduced in the House of Representatives on 1 April 2004, and
lapsed with the proroguing of Parliament during the 2004 election period.

As part of the Family Law Amendment Bill 2004, the amendments were referred
for inquiry to the Senate Legal and Constitutional Legislation Committee
(the Senate Committee), which reported on 30 July 2004.  The amendments
incorporate a change recommended by the Senate Committee, changing section
79F to ensure that the court is able to determine the circumstances in
which third parties are to be notified of proceedings under Part VIII of
the Family Law Act (which deals with financial matters).

Clause 1 of the Government amendments provides that the amendments in new
Schedule 5 will commence 28 days after the Royal Assent is given to the
Bill.

Clause 2 of the Government amendments inserts new Schedule 5 to the Bill.
Schedule 5 contains 5 items of amendments to the Family Law Act 1975.

Item 1 inserts new subsection 79(10) in the Act, allowing a creditor of a
party to family law property proceedings, or any other person whose
interests would be affected by an order in such proceedings, to apply for a
family property order.

   Item 2 inserts subsection 79A(4) in the Act.  Section 79A sets out the
   circumstances in which the court can set aside a family property order.
   This new subsection would clarify, for the purpose of section 79A, that
   a third party creditor has standing in family property proceedings as a
   person affected by a family property order if the creditor can show that
   he or she would be unable to recover his or her debt if such an order
   were made.

   Item 3 inserts new section 79F in the Act, to allow for Rules of Court
   to be made specifying the circumstances in which a party or a person
   applying for orders in family property or spousal maintenance
   proceedings may be required to notify a third party (for example, a
   creditor of a party) of those proceedings.

   Item 4 inserts new section 90D in Part VIIIA of the Act, dealing with
   binding financial agreements.  This amendment requires that, if parties
   make a financial agreement under the Act that deals with post-separation
   property or spousal maintenance arrangements, they must also make a
   written separation declaration.  The declaration must state that the
   parties have separated, are living separately, and are unlikely to
   resume cohabitation.  The agreement will have no effect, to the extent
   that it deals with those arrangements, if the declaration is not made.

   Item 5 inserts new subsection 106B(4AA) in the Act.  Section 106B allows
   the court to make an order to set aside or restrain a transaction that
   might defeat a claim or an interest in proceedings under the Act.  The
   amendment would clarify that an application can be made under section
   106B by a party, or by a creditor of a party, or by a person whose
   interests would be affected by the transaction.

FINANCIAL IMPACT STATEMENT

These Government amendments will have no financial impact.



NOTES ON CLAUSES

Clause 1 -  substitution to subsection 66X(2)

1. Clause 1 of the Government amendments amends the wording of
   subsection 66X(2) so that the court must make such order as it considers
   just and equitable for repayment to the maintenance provider of monies
   paid or property transferred under a child maintenance order in
   applicable circumstances under that section.

Clause 2 - substitution to paragraphs 66X(2)(a) and (b)

2. The amendments support the amendments in clause 1 to subsection 66X(2),
   and insert additional wording after paragraph 66X(2)(b) to specify that
   that the court has a discretion to order repayment of less than the full
   amount of monies paid, or return of less than the full value of property
   transferred under a child maintenance order in exceptional circumstances.
     These circumstances might include, for example, the situation where the
   likely effect of ordering recovery of the full amount of child
   maintenance monies paid under the purported order would be to render the
   original beneficiary of those monies bankrupt.

where a maintenance order has been registered under that Act the amounts
become a debt to the Commonwealth which may otherwise lead to a potential
liability for the Commonwealth to repay.may