BILLS - Bankruptcy Amendment (Debt Agreement Reform) Bill 2018 - Second Reading


Senator IAN MACDONALD (Queensland) (13:48): I thank my colleague Senator Hume, an obvious expert on this subject, who was a member of the committee that looked into this bill. I apologise for not being here for my turn to speak, because I was at another committee meeting. I chaired the Legal and Constitutional Affairs Legislation Committee which inquired into both these bills and had hearings on both bills jointly in Sydney on 5 March and Melbourne on 6 March.

We had a number of witnesses who appeared before the committee and who gave assistance to the committee in their consideration of those bills. I want to thank all of those who made written submissions to the bill, which numbered 19 in all. A number of these submitters agreed to come before the committee and give evidence in person. I want to thank the committee secretariat and the staff of the secretariat for the work they do in assisting the committee in this and other bills that the Legal and Constitutional Affairs Legislation Committee is required to deal with.

The Bankruptcy Act provides a number of options for a debtor with unmanageable debt to take control of their personal affairs while also allowing for creditors to receive a proportion of what they're owed. Debt agreements were actually first introduced in 1996 and were:

… designed to be a low cost alternative to bankruptcy for persons with few if any divisible assets, and low income levels.

The eligibility requirements for bankruptcy as opposed to debt agreements were set out in a table provided by the Australian Financial Security Authority, and anyone interested in this subject would find on page 2 of our report the comparison between bankruptcies and debt agreements. I won't go through that in any detail, but anyone who's interested could follow that table.

Before I make a few comments about the committee's inquiry and conclusions into both bills, I do want to point out that these are bills submitted by the government to parliament and that when the bills get to the Senate they are referred by the Selection of Bills Committee to an appropriate committee—in this case, the Legal and Constitutional Affairs Legislation Committee—to have a look at them in detail. As Senator Hume has so clearly enunciated, the committee had a number of concerns about the bill, even though the committee, of course, has a majority of government members. But following the submissions made to the committee, and following the evidence given to the committee in its public hearings, the committee determined to recommend to the government that certain amendments be made to the government's own bill.

I think it's worthwhile noting that it's a credit to the system that after the committee having inquired into it in some detail and making these recommendations, the government has then taken the recommendations onboard and introduced some amendments to its own bill to make sure that the amendments are appropriate and that the bill actually is in its best possible form. I think in this case, if my memory serves me correctly, that whilst this committee had a majority of government members it also had Labor Party members and a member of the Greens. I might, in passing, thank all of my colleagues for their attention to the detail of this hearing and this report. But I think it's notable that this is a unanimous report of all members of the committee. Committee members from all different political parties were able to join together and say to the government, 'We like the bills, but we think there needs to be some amendments to those bills to make them work better to deal with some issues that were raised in the hearings by the witnesses'—in many cases, expert witnesses.

In its report, the committee noted and shared the concern raised by submitters in relation to the reduction in the default period under the Bankruptcy Amendment (Enterprise Incentives) Bill 2017. The committee in particular noted the various potential means of differentiating between businesses and personal bankruptcies, as suggested by submitters. The committee, however, weighed this evidence against the advice from the department, which suggested that it was impractical and potentially impossible to achieve a true distinction between the two types of bankruptcies. The committee was mindful that the causes of bankruptcy are often multifaceted and may not be clearly identified through statistical data. The committee found that, on balance, the evidence suggested that a one-year default period is appropriate, at least for some classes of bankruptcy, having regard to the issues raised at the aims of the bill. However, the committee strongly encouraged the government to consider the comments and recommendations made later in our report, which are aimed at ameliorating some of what the committee and many submitters saw as the potential risks in curtailing the current default period.

As a result of its determinations, the committee recommended that the government give positive consideration to the suggestion from ASIC, the Australian Securities and Investments Corporation, to amending the Corporations Act to ameliorate the risk of the one-year default period being made available to bankrupts for whom such a concession is not desirable or justifiable as an outcome. The second recommendation of the committee was that, subject to that foregoing recommendation, the bill should be passed by the Senate. I understand that the government has acted in accordance with that recommendation. Accordingly, the committee then unanimously recommends that the enterprise incentives bill be passed by the Senate. I'd hope that the Senate as a whole might agree with that.

In relation to the Bankruptcy Amendment (Debt Agreement Reform) Bill, the committee noticed that there had been an increase in popularity of debt agreements. One of the aims of the bill was to increase the public's trust and confidence in debt agreement administrators. The committee considered that the proposed amendment to limit the types of practitioners who are able to administer debt agreements, along with enabling the Attorney-General to set industry conditions for administrators, would assist to boost confidence in the professionalism of the administrators.

The committee noted various recommendations made by a number of submitters, including requiring debt agreement administrators to complete formal training on personal insolvency, including undertaking ongoing formal education; to hold membership of a professional body with a commitment to a code of conduct; and provide more information to debtors prior to entering into debt agreements as well as at other stages of the debt agreement. The committee also noted that debt agreement administrators should join the Australian Financial Complaints Authority once it was established. The committee made no specific recommendations in respect of these suggestions, but we did draw them to the attention of the government and suggested that they did have merit.

As my colleague Senator Hume has already advised in some detail, the committee did recommend that the government should consider amending the Bankruptcy Amendment (Debt Agreement Reform) Bill to allow for debt agreements implemented under the three-year cap to be capable of being extended for an additional two years by the agreement of the debtor, creditors and debt agreement administrators. The committee made that report after considering some of the written submissions, but particularly after various witnesses appeared before the committee and explained the need for those amendments. I'm very pleased to say that the government has acted upon that unanimous report of the committee and adopted that recommendation.

I'm not going to be able to finish my presentation. There are a couple more recommendations that the committee made that I'd like to talk on later. Clearly, it's a bill that does have the support of the committee and all members of the committee and it should be passed.

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