Commonwealth Numbered Regulations - Explanatory Statements

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BANKRUPTCY RULES (AMENDMENT) 1992 NO. 194

EXPLANATORY STATEMENT

Statutory Rules 1992 No. 194

Issued by the authority of the Minister for Justice

Bankruptcy Act 1966

Bankruptcy Rules (Amendment)

The Bankruptcy Rules (Amendment) amends the Bankruptcy Rules to make amendments consequential to the enactment of the Bankruptcy Amendment Act 1991, and to improve and streamline procedures provided for in the Bankruptcy Rules.

Paragraph 139L(e) of the definition of income in the Bankruptcy Act 1966 (the Act) provides that income for the purposes of the Act includes the value of a benefit, which is, or if it were provided by an employer would be, a fringe benefit for the purposes of the Fringe Benefits Tax Assessment Act 1986 being that value as worked out in accordance with that Act but subject to any modifications of those provisions made by the rules. The Bankruptcy Rules (Amendment) include provision to modify the operation of the Fringe Benefits Tax Assessment Act 1986 to make the various formulae for calculating the value of non-cash benefits more directly applicable to the bankruptcy context.

Details of rules

Rule 1 - Commencement

Rule 1 provides for the commencement of the amendments on 1 July 1992, the same day as Part 2 of the Bankruptcy Amendment Act 1991 (the Amendment Act) was proclaimed to commence.

Rule 2 - Amendment

The Bankruptcy Rules have been amended as provided for in the Bankruptcy Rules (Amendment).

Rule 3 - Rule 27 (Notice of bankruptcy)

Paragraph 3.1 provided for the omission of subrule 27(1) of the Bankruptcy Rules and the insertion of a new subrule 27(1).

Under the Act, the trustee is required, within 28 days of the date of the bankruptcy, or within such further period as the Registrar allows on application by the trustee, to give notice of the bankruptcy to each creditor of the bankrupt whose address is known to the trustee, and to forward to each such creditor a summary of the bankrupt's statement of affairs if the trustee has received it Ride 27(1) provided that the trustee must give to the bankrupt following bankruptcy, in the case of a bankruptcy by sequestration order a sealed copy of the order or in the case of acceptance of a debtor's petition a notice informing the person that the petition has been accepted. Subrule 27(1A) provided that if the trustee is a registered trustee he or she must give to the Official Receiver a copy of the order or notice at the same time as it is given to the bankrupt.

Section 64 of the Act is amended by the insertion of section 64B of the Amendment Act. Section 64B sets out certain matters that are to be included in a notice of a meeting of creditors. Item 1.1 inserted into Schedule 1A a modification of paragraph 64B(6)(b) which provides that where creditors are attending a first meeting of creditors, the notice of the meeting must include a copy of the bankrupt's statement of affairs. With the insertion of item 1.1 of Schedule 1A, paragraph 27(30), which requires the trustee to send a summary of the bankrupt's statement of affairs to the creditors when it has been filed, became unnecessary and paragraph 3.2 omitted paragraph 27(3) (b).

Section 41 of the Amendment Act applies section 156A to the administration of deceased estates in bankruptcy. Paragraph 3.3 omitted the reference to the Official Receiver and substituted a reference to the trustee in subrule 27(4) with the effect of enabling a registered trustee to consent to be trustee of an administration of a deceased estate in bankruptcy from the outset of the administration.

Rule 4 - Rule 30 (Affidavit verifying statement of affairs)

The Amendment Act reformed the law relating to income contributions and discharge of bankrupts from bankruptcy. New section 6A of the Act required persons who have become bankrupt as a result of the making of a sequestration order, and debtors presenting bankruptcy petitions, to file a statement of affairs with the Registrar in Bankruptcy. A statement of affairs for these purposes must be in a form approved by the Inspector-General in Bankruptcy and published in the Gazette. Subsection 6A(2) set out the particulars required for the form of the statement of affairs. Rule 30 provided that an affidavit verifying a statement of affairs, other than a statement of affairs for the purposes of subsection 246(1) or 1 247(1) must be in accordance with Form 10. With the insertion of new section 6A in the Act, rule 30 became unnecessary and rule 4 provided for its omission.

Rule 5 - Rule 30A (Form of statement of affairs)

Rule 30A provided that a statement of affairs must be in the form provided by the Registrar for the purpose. In respect of paragraphs 54(1)(a), 55(2)(b), 56(2)(a), 56(13)(a) and (b) and 57(2)(a) of the Act, which relate to the filing of statements of affairs by debtors who are presenting a debtor's petition and by bankrupts against whose estate a sequestration order has been made, rule 30A prescribed certain information. With the insertion of new subsection 6A(2) by section 4 of the Amendment Act, which set out the information required for the form of the statement of affairs, rule 30A became unnecessary and rule 5 provided for its omission.

Rule 6 - Rule 30B (Statement of affairs by joint debtor)

Rule 30B provided that joint debtors, whether partners or not, shall file with the Registrar a statement of their joint affairs, in accordance with a form provided by the Registrar. Section 4 of the Amendment Act inserted new subsection 6A(2) which provides that a reference to a statement of affairs is a reference to a statement that is in a form approved by the InspectorGeneral in Bankruptcy and published in the Gazette. With the insertion of new subsection 6A(2), rule 30B became unnecessary and rule 6 provided for its omission. ,

Rule 7 - Rule 35 (Application for approval of composition or scheme)

Section 17 of the Amendment Act inserted new section 76A. Section 76A provides that rules may be made to modify the operation of Division 5 of Part IV of the Amendment Act which deals with meetings of creditors convened to consider a bankrupt's proposal for a scheme or composition. Rule 7 omitted rule 35 and substituted it with a rule providing for modifications of Division 5 of Part IV of the Act to be set out in Schedule 1A. Schedule 1A of these rules contains the procedures to be followed in relation to such meetings.

Rule 8 - Rule 36 (Notice of approval to be published in Gazette)

Rule 8 provided for the omission of rule 36 which required the Registrar to publish notice of the making of an order of the Court approving a composition or scheme in the Gazette.

Section 15 of the Amendment Act inserted new section 74(5) which provides that the passing of a special resolution at a meeting of creditors approving a composition or scheme of arrangement will have effect so that the bankruptcy is annulled by operation of law. As soon as practicable after the passing of a special resolution approving a composition or scheme of arrangement, the trustee must give notice in writing to the Registrar setting out the name and bankruptcy number of the former bankrupt and the date of the annulment (subsection 74(5A)). The insertion of rule 36 requires the Registrar as soon as practicable after he or she has received such a notice in writing from the trustee, to publish a notice in the Gazette stating that the bankruptcy has been annulled and the date on which it was annulled.

Rule 9 - Rule 41 (Special provision in relation to appropriation of income)

The Amendment Act repealed section 131 of the Act which provided that subject to any contrary order of the court a bankrupt was entitled to retain income for his or her own benefit. Rule 41 of the Bankruptcy Rules details the procedure to be followed in respect of applications to the Court to appropriate income. With the repeal of section 131, rule 41 of the Bankruptcy Rules was no longer necessary and rule 9 provided for its repeal.

Rule 10 - New Divisions 4B, 4C and 4D of Part III

Rule 10 inserted new Divisions 4B, 4C, and 4D of Part HI of the rules.

Division 4B of Part III of the Bankruptcy Rules

Section 25 of the Amendment Act inserted subsection 139P(1) which contains the general rule that a bankrupt is liable to pay contribution from income to his or her estate where the bankrupt is assessed by the trustee as being likely to derive income in excess of the actual income threshold amount applicable in relation to the bankrupt at the time the assessment is made. The base income threshold amount is linked to the maximum basic rate of pension under the Social Security Act 1991 which is indexed. Division 4B of Part III of the rules related to the contributions payable by a bankrupt under subsections 139P(1) or 139Q(1) of the Amendment Act.

Rule 45B - (Interpretation)

Rule 45B of the Bankruptcy Rules defined contribution for the purposes of those subsections.

Rule 45C - (Payment of contribution in person)

Rule 45C provided that the contribution paid by a bankrupt to the trustee in person must be made at the trustee's place of business as a trustee and by cash or cheque. Subrule 45C(2) provided that payment by cheque is not made until the trustee collects the amount for which the cheque is drawn.

Rule 45D - (Payment of contribution by mail)

Rule 45D set out the manner in which contributions may be paid by a bankrupt to a trustee by mail.

Rule 45E - (Payment of contribution by bank deposit)

Rule 45E set out the way in which the contributions must be made by the bankrupt, to his or her trustee, where they are made by bank deposit.

Rule 45F - (Certificate that an amount is due as a contribution)

Where a bankrupt is assessed as liable to make contributions to the trustee, subsection 139ZG(3) of the Act provides that where a bankrupt has not paid any amounts required to be paid by way of contribution, the trustee must sign a certificate stating that the amount or the total of the amounts is due and payable by the bankrupt to the trustee but has not been paid, and file the certificate in a court of competent jurisdiction to the extent of the amount or the total of the amounts. Subrule 45F(1) set out the matters which the trustee may include in the certificate. In any action against the bankrupt for the recovery of the contributions, subrule 45F(2) provided that the certificate in writing, prepared by the trustee under subrule 45F(1) is prima fade evidence of the facts stated in the certificate.

Rule 45G - (Notice under section 139ZL of the Act not to refer to money that is protected from garnishment or encumbrance)

Section 139ZL of the Act provides that where a bankrupt is assessed as liable to make contributions to the trustee, the Official Receiver may issue a notice to a person who is in one of the classes of person mentioned in section 139ZK, requiring that person to make a payment or payments to the trustee in or toward the discharge of the liability of the bankrupt to make contributions. Rule 45G excluded from such payments to the trustee money that is protected under a law of the Commonwealth, State or Territory, from garnishment or encumbrance.

Rule 45H - (Notice that the bankrupt is no longer employed by an employer)

Rule 45H of the Bankruptcy Rules set out the matters which must be included in a notice to the trustee by a former employer of the bankrupt who has received notice from the Official Receiver under section 139ZL, that the bankrupt is no longer employed by him or her. Failure to comply with this rule is an offence punishable by a fine of $200.

Division 4C of Part III of the Bankruptcy Rules

Rule 10 inserted into the Bankruptcy Rules of a new Division 4C of Part III.

Rule 45T - (Procedure for hearing application for permission to leave Australia)

Rule 45J of the Bankruptcy Rules set out the procedure for the hearing of an application by a bankrupt for permission to travel outside Australia where the bankrupt is liable to pay a contribution under subsection 139P(1) or 139Q(1) of the Amendment Act.

Division 4D of Part III of the Bankruptcy Rules

Rule 10 inserted into the Bankruptcy Rules of a new Division 4D of Part III.

Section 139L of the Bankruptcy Act 1966 (the Act) defines 'income' for the purposes of the compulsory income contribution regime established under Division 4B of Part VI of the Act. Paragraph (e) of the definition of income provides that income includes 'the value of a benefit that is, or if it were provided by an employer would be, a fringe benefit for the purposes of the Fringe Benefits Tax Assessment Act 1986, being that value as worked out in accordance with the provisions of that Act but subject to any modifications of those provisions made by the rules'. Division 4D of Part III of the Bankruptcy Rules made modifications to valuation provisions in the Fringe Benefits Tax Assessment Act 1986 for the purposes of the definition of 'income' in paragraph 139L(e) of the Act.

Rule 45K - (Interpretation)

Rule 45K of Division 4D of the Bankruptcy Rules stated that the term 'the FBT Act' referred to the Fringe Benefits Tax Assessment Act 1986. In this Explanatory Statement, 'the FBT Act' is used when referring to the Fringe Benefits Tax Assessment Act 1986.

Rule 45L - (Modification of the Fringe Benefits Tax Assessment Act 1986)

Subrule 45L(1) modified 5 terms used in the FBT Act for bankruptcy purposes. Expressions used in the FBT Act such as 'year of tax', 'taxable value of a benefit', 'declaration date' and 'approved form' are not relevant for the purposes of the Act. The FBT Act accordingly was modified to introduce terminology relevant to a bankruptcy context.

Paragraph 45L(1)(a) provided that a reference in the FBT Act to a 'year of tax' is taken as a reference to the 'contribution assessment period' A contribution assessment period is defined in section 139K of the Act to be a period which begins on the commencement of the bankruptcy of a person and ends on the anniversary of that commencement, and each subsequent 1 year period until the person is discharged from bankruptcy.

Paragraph 45L(b) provided that a reference in the FBT Act to the taxable value of a benefit is taken as a reference to the value of that benefit for the purposes of the Act. Where a person who is a bankrupt receives a benefit of a kind which would be a fringe benefit under the FBT Act if it were provided to the person by the person's employer, the value of that benefit must be included by the trustee of the bankrupt's estate in the assessed income of the bankrupt for the contribution assessment period in which the benefit was enjoyed by the bankrupt.

Paragraph 45L(c) provided that a reference in the FBT Act to the declaration date, which is the date of lodgment by an employer of a return of the employer's fringe benefits taxable amount is taken as a reference to the date that occurs 21 days after the end of a contribution assessment period in relation to a bankrupt. Section 139U of the Act provides that within 21 days after the end of a contribution assessment period, the bankrupt must give to the trustee a statement of his or her income for the completed contribution assessment period, and a statement indicating what income the bankrupt expects to derive during the next contribution assessment period.

Paragraph 45L(d) provided that references in the FBT Act to declarations to be given to an employer are to be taken as references to declarations to be given to a trustee for bankruptcy purposes.

Paragraph 45L(e) provided that references in the FBT Act to forms approved by the Commissioner of Taxation, are for the purposes of bankruptcy to be taken as references to forms approved by the inspector-General in Bankruptcy.

Subrule 45L(2) provided that further modifications of the FBT Act set out in Schedule 1B to the Bankruptcy Rules apply for the purposes of paragraph 139L(e) of the definition of income in the Act.

Rule 45M - (Assessment of value of car benefits based on return made under the Fringe Benefits Tax Assessment Act 1986)

Rule 45M of Division 4D of Part III of the Bankruptcy Rules was concerned with the valuation of car benefits provided to a bankrupt.

Subrule 45M(1) provided for the calculation of the value of a car benefit received by a bankrupt in a case where the car benefit is provided by the bankrupt's employer, and the contribution assessment period coincides with a year of tax. In such a case, where the employer has made a return to the Commissioner of Taxation in relation to the car benefit in the particular year of tax, the value of the benefit for the purposes of including that value in the assessed income of the bankrupt for the contribution assessment period is the taxable value of the benefit as assessed by the Commissioner.

Subrule 45M(2) related to the situation where a car benefit is provided to a bankrupt or an associate of the bankrupt by an employer and the employer has not made a return to the Commissioner of Taxation. The value of the benefit to the bankrupt is determined in accordance with section 9 of the FBT Act as modified for the purposes of the Act by the Bankruptcy Rules.

Subrule 45M(3) provided that where the bankrupt is not employed, the value of a benefit provided to the bankrupt or an associate of the bankrupt which would be a car fringe benefit for FBT Act purposes if it were supplied to the bankrupt or his or her associate by an employer is determined in accordance with section 9 of the FBT Act as modified by the Bankruptcy Rules.

The FBT Act requires that certain documentary evidence in relation to the use of a car should be provided to an employer. Under subrule 45M(4), a reference in section 9 of the FBT Act to the provision of documentary evidence to an employer is taken for bankruptcy purposes to be a reference to the provision of documentary evidence to the trustee of the bankruptcy. The documentary evidence in question is evidence of expenditure by the bankrupt in relation to the car, being a receipt, invoice or other similar document which sets out particulars of the date on which the expense was incurred, the name and where applicable, the business name of the person who supplied the goods or services the subject of the expenses, the amount of the expense, the nature of the goods or services, and the date of the receipt, invoice or other document.

By subrule 45M(5), a reference to an 'associate' of the bankrupt is taken to have the same meaning in relation to a bankrupt as the term 'associate' is defined in relation to a taxpayer in subsection 26AAB(14) of the Income Tax Assessment Act 1936. Thus, 'associate' for the purpose includes:

•       a relative of the bankrupt;

•       a partner of the bankrupt,

•       the spouse or child of a partner of the bankrupt;

•       the trustee of a trust estate, where the bankrupt or a person who is an associate of the bankrupt is capable of benefiting under the trust, whether directly or indirectly through any interposed trusts, partnerships or companies;

•       a company, where the company or its directors are accustomed or under an obligation, whether formal or informal to act in accordance with the directions, instructions or wishes of the bankrupt or an associate of the bankrupt or any two or more such associates.

•       a company where the bankrupt and his or her associates are in the position to cast or control the casting of more than 50% of the maximum number of votes that may be cast at a general meeting of the company;

•       if the bankrupt is trustee of a trust estate, any person capable of benefiting from the trust estate either directly or indirectly through interposed companies, trusts or partnerships and any person who, if the person capable of benefiting from the trust were a bankrupt, would be an associate of that person.

Rule 45N - (Assessment of value where the taxable value of a fringe benefit Payment would be reduced by an 'otherwise deductible' rule)

Under the FBT Act, the taxable value of certain fringe benefits is reduced in certain circumstances. Rule 45N of Division 4D of the Bankruptcy Rules provided that where the bankrupt receives a benefit and the taxable value of that benefit would be reduced for the purposes of the FBT Act, then the value of the benefit to the bankrupt for the purposes of assessing a bankrupt's income during a contribution assessment period is reduced in the same manner as the taxable value of a fringe benefit would be reduced in accordance with the relevant provisions of the FBT Act, as modified by the Bankruptcy Rules.

Subrule 45N(1) provided that rule 45N of the Bankruptcy Rules applies to fringe benefits received by a bankrupt which would have a reduced taxable value under sections 19, 24, 34 or 52 of the FBT Act, and benefits received by a bankrupt, not being fringe benefits, but which would be fringe benefits for the purposes of the FBT Act if they were provided to the bankrupt by an employer of the bankrupt, and the value of which would be reduced pursuant to sections 19, 24; 34 or 52 of the FBT Act. The relevant benefits are loan benefits, expense payment benefits, airline transport benefits and other benefits outside categories specifically enumerated in the FBT Act.

Subrules 45N(2) and (3) provided that where the bankrupt receives a benefit which, if it were a fringe benefit would be reduced in taxable value by virtue of sections 19, 24, 34 or 52 of the FBT Act, then the income value of the benefit to the bankrupt during the contribution assessment period is reduced in the same manner as the taxable value would be reduced, if the benefit were a fringe benefit for the purposes of the FBT Act.

Subrule 45N(4) modified sections 19, 24, 34 and 52 of the FBT Act for the purposes of paragraph (e) of the definition of 'income' in section 139L of the Act.

Paragraph 45N(4)(a) provided that references in sections 19, 24, 34 and 52 of the FBT Act to Division 14 of Part III of the FBT Act are disregarded. Division 14 of Part III provides for the reduction of the taxable value of miscellaneous fringe benefits falling into special categories such as overseas employment holiday transport, meals provided in temporary accommodation and the like. For bankruptcy purposes, only the general formulae for reducing taxable value apply.

Paragraph 45N(4)(b) provided that subsection 24(1) of the FBT Act is modified by the omission of subparagraph (b)(i), and sub-subparagraphs (h)(ii)(A), (j)(v)(A) and (k)(iv)(A). In relation to expense payment fringe benefits, the distinction between 'in-house' and 'external' expense payment fringe benefits does not apply in the bankruptcy context, although such a distinction is drawn for FBT Act purposes. 'Inhouse' benefits arise where the provider of the benefit is in the business of providing goods or services and makes those goods or services available, perhaps at a discount, or at no cost to employees. External benefits are benefits other than 'inhouse' benefits. There is no purpose in drawing a distinction between in-house and external expense payment benefits for bankruptcy purposes.

Paragraph 45N(4)(c) provided that subparagraph 24(1)(b)(ii) and sub-subparagraphs 24(1)(h)(ii)(B) and (j)(v)(B), (k)(iv)(B) are modified by omitting the word 'external'. This modification is necessary since no distinction is drawn between 'in-house' and 'external' fringe benefits in bankruptcy.

Paragraph 45N(4)(d) omitted subsection 24(6).

Rule 11 - Rule 47 (Statement of realisation and distribution of estate)

Rule 47 sets out the documents that the trustee must send to creditors when issuing a statement of realisation and distribution of an estate. Statutory Rules No. 117 of 1991 required trustees to file copies of Form 21 in relation to a dividend and the most recently filed Form 33 for an estate when the trustee sends a notice under subsections 140(3) or 140(5) of the Act, that is, when a trustee gives a notice of intention to declare a dividend in a bankrupt estate. However, the trustee is not required to prepare Form 21 until the dividend is declared (subsection 140(8), subrule 47(1)) which must be at least 21 days after notice of intention to declare a dividend is given (subsection 140(7)). Compliance with subrule 47(2) is not possible and serves no purpose at the time the trustee gives notice of intention to declare the dividend. Proposed rule 11 clarifies the operation of subrule 47(2) by omitting a reference to subsection 140(3) or (5) and substituting a reference to subsection 140(8).

Rule 12 - Rule 49 (Trustee to inform the Registrar of return of bankrupt to Australia)

Subsection 149(5) of the Act requires the Registrar to enter, in his or her records the date on which the bankrupt is discharged. One ground for objecting to discharge specified in section 149D of the Amendment Act is the failure of a bankrupt who is overseas, to return to Australia. In such a case, the prescribed date from which the extended period of bankruptcy is calculated is the date of return to Australia of the bankrupt.

Rule 12 provided for the omission of rule 49 and substitution of a new rule 49 to require the trustee of the bankrupt estate to notify the Registrar of the date of the bankrupt's return as soon as practicable after the trustee becomes aware of it.

Rule 13 - Rule 50 (Trustee to inform Registrar of cancellation of objection)

Rule 13 provided for the omission of rule 50 and substitution of a new rule 50 which requires the trustee of the bankrupt estate to notify the Registrar of the date of cancellation of an objection by the Inspector-General in Bankruptcy under new subsection 149N(1) of the Act, or by the Administrative Appeals Tribunal on review of a decision by the Inspector-General under new section 149Q of the Act.

Rule 14 - Rule 51 (Certificate of Discharge)

Section 27 of the Amendment Act repealed Part VII of the Act which provided for the discharge of bankrupts by operation of law and by court order and also for the annulment of bankruptcy. A new Part VII was inserted into the Act. With the repeal of Part VII and insertion of a new Part VII of the Act, rule 51 became unnecessary and rule 14 omitted rule 51 of the Bankruptcy Rules.

Rule 15 - Rule 51A (Matters prescribed for the purposes of subsections 149(10) and (13) of the Act)

Rule 51A prescribes matters for the purposes of subsection 149(10) and (13) of the Act. Section 27 of the Amendment Act repealed Part VII of the Act which provided for the discharge of bankrupts by operation of law and by court order and also for the annulment of bankruptcy. With the repeal of Part VII and insertion of a new Part VII by the Amendment Act, rule 51A became unnecessary and rule 15 omitted rule 51A.

Rule 16 - Rule 52 (Application for discharge)

Section 27 of the Amendment Act repealed Part VII of the Act which provided for the discharge of bankrupts by operation of law and by court order and also for the annulment of bankruptcy. A new Part VII was also inserted in the Act. With the repeal of Part VII and insertion of a new Part VII of the Act, rule 52 became unnecessary. Rule 16 omitted rule 52 of the Bankruptcy Rules.

Rule 17 - Rule 53 (Report under subsection 150(3) of the Act)

Rule 53 relates to the preparation of a report for the purposes of section 150 of the Act, which provided for discharge by court order. Section 27 of the Amendment Act repealed Part VII of the Act and inserted a new Part VII which deals with discharge, annulment and objections. With the repeal of Part VII, rule 53 became unnecessary and rule 17 omitted rule 53 of the Bankruptcy Rules.

Rule 18 - Rule 54 (Notice of intention to dispute report)

Rule 54 deals with the notice of intention to dispute the report required by section 150 for an application for discharge from bankruptcy by court order. This rule was made unnecessary by section 27 of the Amendment Act repealing Part VII of the Act and inserting a new Part VII of the Act to deal with discharge, annulment and objections to discharge. Rule 18 omitted rule 54 of the Bankruptcy Rules.

Rule 19 - Rule 55 (Opposition to application for discharge)

With the repeal of Part VII and insertion of a new Part VII of the Act, rule 55 became unnecessary. Rule 55 related to the opposition by a creditor to a bankrupt's application for discharge by court order. As a consequence, rule 19 repealed rule 55.

Rule 20 - Rule 56 (Variation of order of discharge)

Section 27 of the Amendment Act inserted a new Part VII of the Act which deals with discharge, annulment and objections to discharge. With the repeal of former Part VII, rule 56 became unnecessary and rule 19 repealed it.

Rule 21 - Rule 57 (Application for annulment under section 153B or 252B of the Act)

The Amendment Act altered references to provisions of the Act which have been amended by the Amendment Act. Paragraph 21.1 made a technical amendment of rule 57 by substituting references to sections 154 and 252A in the heading of rule 57 and subrule 57(1) with references to sections 153B and 252A respectively.

Rule 22 - New Rule 78A (Proxies)

Rule 22 inserted a new rule 78A.

Subrule 78A(1) requires that an instrument of appointment of a proxy to vote at a meeting held under Part X of the Act shall be in accordance with Form 43, unless the proxy is appointed to vote on a special resolution under section 204 of the Act in which case the proxy form should be in accordance with Form 44. In relation to proxies to vote on special resolutions under section 204 of the Act, Form 44 requires a creditor to indicate specifically how the proxy is to exercise the creditor's vote, and to specify the conditions if any that the proxy holder is to observe in exercising the creditor's vote.

Subrule 78A(2) provides that if the instrument of appointment purports to appoint the bankrupt as a proxy, the purported appointment does not have any effect.

Rule 78A of the Bankruptcy Rules relied upon section 64ZC of the Act which clarifies the technical aspects of appointment of proxies.

Rule 23 - New Rule 85A (Application of Division 5 of Part IV of the Act to a meeting under Part X of the Act)

Division 5 of Part IV of the Act includes provisions to clarify procedures which should be followed at meetings of creditors.

Rule 23 inserted a new rule 85A which applies the practice and procedure prescribed for meetings of creditors in bankrupt estates to meetings held under Division 2 or Division 3 of Part X of the Act.

Rule 24 - Rule 90 (Modifications of provisions of the Act applied by section 248)

Rule 90 of the Bankruptcy Rules modifies general provisions of the Act applied to the administration of the estates of deceased persons by section 248 of the Act. With the repeal of section 66 and subsection 74(1) by the Amendment Act, the modification of these sections as prescribed in paragraphs 90(a) and 90(c) become unnecessary.

Paragraph 90(c) modified section 74 of the Act in its application to annulment of administrations of estates under Part M of the Act. The modification gave effect so that the order for administration of a deceased estate is annulled on the day on which a special resolution is passed. Subsection 74(2) of the Act provides that the trustee must give the Registrar notice in writing setting out the name of the estate; the number of the administration and the date of the annulment of the order. Subsection 74(3) of the Act provides that the Registrar must enter in his or her records the fact that the administration has been annulled and the date of the annulment.

Paragraph 90(d) modified section 75 of the Act which relates to new and additional grounds on which the Court can annul a bankrupt's compositions and schemes, namely: where the creditors, or legal representative, or beneficiary who proposed the composition or scheme of arrangement will suffer injustice or undue delay; where the approval of the creditors was obtained by a misrepresentation; where it is desirable that the deceased debtor's affairs be investigated and administered under the provisions of the Act or where it is likely that the creditors will receive a greater dividend if the estate is again administered under the Act.

Rule 25 - Part IX (Meetings of creditors of deceased debtor)

Rule 25 omitted 'Part IX (Meeting of Creditors)' of the Bankruptcy Rules and substituted a new Part IX - (Meeting of Creditors of a Deceased Debtor) comprising rifles 93 and 94 which set out the procedure for holding meetings of creditors of the estate of a deceased debtor.

Rule 26 - Part IXA (Special provisions relating to joint debtors)

Rule 26 omitted Part IXA of the Bankruptcy Rules which set out special provisions relating to meetings of creditors convenced where joint debtors are involved.

Division 5 of Part, IV of the Act introduced provisions to substantially clarify procedures which should be followed at meetings of creditors. Division 5 is further divided into a number of subdivisions dealing with specific aspects of the conduct of meetings. The insertion by the Amendment Act of Division 5 of Part IV of the Act made Part IXA of the Bankruptcy Rules unnecessary and therefore Part IXA was repealed by rule 26.

Rule 27 - Rule 119A (Prescribed time - subsection 31A(6) of the Act)

Section 139ZU of the Act provides that a bankrupt who is liable to make contribution to his or her bankrupt estate, may apply for permission to travel overseas in certain circumstances. Paragraph 31A(1)(o) of the Act enables a Judge of the Federal Court to delegate to the Registrars the power to make orders under section 139ZU of the Act granting permission to a bankrupt to leave Australia. The exercise of that power may be reviewed under subsection 31A(6) of the Act within a prescribed time. Rule 27 inserted subrule 119(1A) of the Bankruptcy Rules which provides that the prescribed time in relation to the Registrar's power under 31A(1)(o) of the Act, is 24 hours after the day on which the Registrar exercise that power.

Rule 28 - Rule 127 (Conduct money and witnesses' allowances)

Rule 127 of the Bankruptcy Rules provided that when a person is served with a summons under section 50, 81, 179B, or 212D of the Act, the person served is entitled to seek his or her own witness fees and out-of-pocket expenses of attendances.

Rule 28 amended subrule 127(1) to exclude bankrupts or debtors from the class of witnesses entitled to payment of conduct money.

Rule 29 - Rule 129 (Application for summons under subsection 81(1) of the Ad)

Paragraph 29.1 omitted subrule 129(2) and substituted subrules 129(2) and (2A).

Section 81 of the Act provides that the bankrupt (or relevant person) or persons other than the bankrupt (the examinable person in relation to the relevant person) may be summonsed to a public examination to give evidence concerning the bankrupt. Rule 129 provides for the issue of summonses under section 81 of the Act.

Paragraph 29.1 provided that where the issue of a summons is applied for, the Registrar must serve on the person to be examined copies of the application, the affidavit in support of the application and a notice setting out the effect of subrule(2A). Subrule (2A) enabled the person to be examined to file a notice of objection to the production of the books or class of books within 7 days.

Paragraph 29.2 omitted the reference in subrule 129(3) to paragraphs 2(a) and (b) and substituted subrule 2A.

Rule 30 - Rule 129AA (Summons to relevant person under subsection 81(1) of the Act)

Rule 30 inserted into subparagraph 129AA(5)(c)(ii) after 'relevant person', the words 'by personal service or' so that if the Court is satisfied that a summons for books or documents to be produced by a person during an examination under subsection 81(1) of the Act was served on the person by personal service, a warrant may be issued for the arrest of the person for failing to comply with the summons.

Rule 31 - Rule 129B (Application during examination for production of books)

Rule 31 modified subrule 129(1) in consequence of the amendments to subrules 129(2) and (2A) to make changes to procedures in bankruptcy proceedings enabling the Registrar in Bankruptcy to issue summonses for the production of books or documents to persons during an examination of a relevant person under subsection 81(1) of the Act.

Rule 32 - New Rule 161B (Official Receiver's charges and fees)

Section 163A of the Act provides that the costs of performing additional functions by Official Receivers at the request of a trustee in bankruptcy are to be borne by the bankrupt estate in relation to which the functions are performed.

Rule 32 inserted a new rule 161B which sets out the Official Receiver's charges and fees.

Paragraph 32.1 inserted subrule 161B(1) of the Bankruptcy Rules which provides that the trustee of a bankrupt estate pays the prescribed fees to the Official Receiver where the Official Receiver personally exercises a power under the Act, the Rules or regulations at the request of the trustee. Paragraphs (a) and (b) of new subrule 161B(1) of the Bankruptcy Rules set out the Official Receiver's hourly rate for the purposes of subsection 163A(2) of the Act.

Subrule 161B(2) of the Bankruptcy Rules prescribed fees for the exercise of a power under the Act, the Rules or regulations by an officer assisting the Official Receiver for the purposes of subsection 15(1) of the Act, at the request of the trustee in bankruptcy. Paragraphs (a), (b) and (c) of subrule 161B(2) of the Bankruptcy Rules set out the hourly rate of the officer assisting the Official Receiver for the purposes of subsections 163A(2) of the Act.

Subrule 161(4) of the Bankruptcy Rules prescribed a fee of $100.00 for the issue or variation of an offshore information notice under subsections 81A(1) or 81C(2) of the Act at the request of the trustee in bankruptcy.

Subrule 161B(5) prescribed a fee of $100.00 for the issue of a notice under paragraph 139ZL(1)(b) or 139ZQ(1)(b) of the Act requiring a person to make a payment or payments to the trustee.

Rule 33 - Rule 162 (Scale of Costs)

Rule 162 of the Bankruptcy Rules sets out the scale of solicitors costs in bankruptcy matters. The scale of costs is reviewed regularly by the Federal Costs Advisory Committee, and the Ninth Report of the Committee has recommended increases in the scale amounting in the aggregate to 2.92 per cent. Rule 34 implemented the recommendation of the Committee's report by applying a 2.92 per cent increase to the scale costs. Bill of costs continue to be calculated in accordance with the scale, but solicitors are allowed to charge an additional amount equal to 2.92% of the total according to the scale.

Rule 34 - Rule 182 (Fees or percentages payable to the Official Trustee)

Rule 182 prescribes certain fees and percentages payable to the Official Trustee where the Official Trustee acts as trustee of a bankrupt estate, carries on the business of a bankrupt, or acts as an interim receiver under section 50 of the Act, as a controlling trustee or as trustee of a Part X arrangement.

Rule 34 amended subrule 182(4) which defines the prescribed amount as being the sum of the total amounts received by the Official Trustee. The effect of the amendment is that the prescribed amount is defined to mean the total amount received by the Official Trustee for distribution to creditors, thus preventing the taking of a fee on a surplus payable to the bankrupt.

Rule 35 - Schedule 1

Schedule 1 to the Bankruptcy Rules prescribes a number of forms, and rule 35 amended Form 10 to make it applicable for the purposes of rule 78 only. Form 10 is the form of affidavit verifying the statement of affairs provided for under rules 30 and 78. Rule 30 became unnecessary since the insertion of section 6A of the Act and is omitted by rule 4. As a consequence, Form 10's application for the purpose of rule 30 was unnecessary and the reference to rule 30 on Form 10 was omitted by rule 35.

Rule 36 - New Schedules 1A and 1B

Rule 36 inserted new Schedules 1A and 1B into the Bankruptcy Rules.

New Schedule 1A - (Modifications of Division 5 of Part IV of the Act in its application to meetings of creditors under Division 6 of Part IV of the Act)

Section 9 of the Amendment Act inserted Division 5 of Part IV of the Act which is entitled Meetings of Creditors and Committee of Inspection, and includes provisions to clarify procedures which should be followed at meetings of creditors.

Rule 7 inserted a new rule 35 providing for the modification of Division 5 of Part IV of the Act to be set out in Schedule 1A. Schedule 1A modified the provisions of Division 5 of Part IV of the Act in its application to meetings of creditors convened to consider a proposal by a bankrupt for a composition or scheme of arrangement pursuant to Division 6 of Part IV of the Act.

New Schedule 1B (Modifications of the Fringe Benefits Tax Assessment Act 1986)

Subrule 45L(2) provided for the insertion of a new Schedule 1B into the Bankruptcy Rules, making modifications to the FBT Act to enable the calculation of the value of benefits assessed as forming part of the income of a bankrupt during a contribution assessment period.

Item 1 - Section 9 (Taxable value of car fringe benefits - statutory formula)

Section 9 of the FBT Act provides a method for calculating the taxable value of a car fringe benefit by the application of a formula in which the base value of the car, the statutory fraction and the number of days during the year in which the car benefit was provided are multiplied. The product is then divided by the number of days in the year of tax. From this amount is deducted any amount that the recipient of the car benefit has expended in relation to the car.

Item 1.1 in the Schedule 1B provided a definition of the term j statutory fraction' in substitution for that contained in the FBT Act. The definition of 'statutory fraction' relates to the first contribution assessment period, and to subsequent contribution assessment periods. In relation to the first contribution assessment period, the statutory fraction is..

•       where the annualised number of kilometres travelled by the car in the year preceding bankruptcy was more than 40,000 - 0.06

•       where the annualised number of kilometres travelled by the car in the year preceding bankruptcy was not less than 25,000 and not more than 40,000 - 0.1

•       where the annualised number of kilometres travelled by the car in the year preceding bankruptcy was not less than 15,000 and not more than 24,999 - 0.18

•       in any other case - 0.24.

For each subsequent contribution assessment period, the statutory fraction is:

•       where the annualised number of whole kilometres travelled by the car in the previous contribution assessment period was more than 40,000 - 0.06,

•       where the annualised number of whole kilometres travelled by the car in the previous contribution assessment period was not less than 25,000 and not more than 40,000 -0.1;

•       where the annualised number of whole kilometres travelled by the car in the previous contribution assessment period was not less than 15,000 and not more than 24,999 -0.18;

•       in any other case - 0.24.

Item 1.2 substituted the definition of 'annualised number of whole kilometres' in paragraph 9(2)(d) of the FBT Act with a varied definition appropriate for bankruptcy purposes. For bankruptcy purposes, the annualised number of whole kilometres is calculated as follows:

•       if the bankrupt has records showing the number of kilometres travelled by the car during the previous year - that number of kilometres;

•       if the bankrupt does not hold records showing the distance travelled by the car in the previous year, then the number calculated in accordance with a formula whereby the number of whole kilometres travelled by the car during the holding period, which is that part of a contribution assessment period for which the car was held by the provider is multiplied by the number of days in the contribution assessment period. The product is divided by the number of days in the holding period, and the result is the annualised number of whole kilometres.

Item 1.3 omitted sub-subparagraph 9(2)(e)(ia)(B) which for FBT purposes, enables the recipient of a car fringe benefit to give documentary evidence of his or her expenses in relation to the car to his or her employer. A bankrupt is required to supply information relating to any expenses he or she has incurred in relation to a car provided to him or her in a form approved by the Inspector-General.

Item 1.3 also inserted 2 examples illustrating how the formula for ascertaining the value of a car benefit to a bankrupt in the first contribution assessment period, and in the next contribution assessment period works.

Item 2 - Section 10 (Taxable value of car fringe benefits - cost basis)

Section 10 of the FBT Act enables an employer to elect an alternative basis to the statutory formula set out in section 9 on which the taxable value of car fringe benefits provided by the employer is calculated, called the cost basis. This method of calculation is not available in determining the value of a car benefit for the purposes of assessing a bankrupts income during a contribution assessment period, and item 2 modifies the FBT Act for bankruptcy purposes by the deletion of section 10.

Item 3 - Section 10A (No reduction of operating cost in a log book year of tax unless 12g book records and odometer records are maintained)

Section 10A of the FBT Act entitles an employer to a reduction in the operating cost of a car on account of business journeys undertaken by the car only where log books and odometer records are maintained. As the operating cost method of assessing the value of a car fringe benefit is not going to be used for bankruptcy purposes, section 10A is unnecessary and item 3 omits that section.

Item 4 - Section 10B (No reduction of operating cost in a non-log book year of tax unless log book records and odometer records are maintained in log book year of tax

Section 10B of the FBT Act provides for the reduction of operating costs in certain circumstances where log book and odometer records are maintained. As mentioned, the operating costs method of calculating the value of car benefits is not going to be used for bankruptcy purposes, and accordingly, section 10B is unnecessary. Item 4 provides for its omission.

Item 5 - Section 10C (Nominated business Percentage to be reduced if it exceeds business percentage established during applicable log book period or if it is unreasonable)

Section 10C of the FBT Act relates to the operating cost method of ascertaining the value of a car fringe benefit, and as this method is not going to be used for bankruptcy purposes, the section was omitted by item 5.

Item 6 - Section 12 (Depreciated value)

Section 12 of the FBT Act deals with calculation of the depreciated value of a car, and applies in relation to determining the value of a car benefit under the operating cost method. This section was omitted by item 6, as it is not useful for bankruptcy purposes

Item 7 - Section 22A (Taxable value of in-house expense payment benefits)

The FBT Act creates a category of benefit called 'expense payment benefit and goes on to draw a distinction between 'in-house' and 'external' expense payment benefits. This distinction is not necessary in the bankruptcy context. Item 7 therefore omitted section 22A of the FBT Act which provides a mechanism for assessing the value of 'in-house' expense payment benefits.

Item 8 - Section 23 (Taxable value of external expense payment fringe benefits)

Section 23 of the FBT Act provides that the taxable value of external expense payment fringe benefits is the full amount of the payment made by the provider of the benefit in the discharge of the recipients liability, whether the payment is made directly to the person in whose favour the liability arises, or is made by way of reimbursement of the recipient. Where the recipient makes a contribution to the payment of the expense in question, that payment does not increase the value of the benefit. This formula is used in valuing all expense payment benefits received by a bankrupt for the purposes of assessing the bankrupts income during a contribution assessment period. Item 8 amended section 23 to remove the word 'external' in order that the formula applies to all. expense payment benefits received by a bankrupt, and also to avoid drawing a distinction between in-house and external benefits for bankruptcy purposes.

Item 9 - (Taxable value of non-remote housing fringe benefits)

The FBT Act draws a distinction between remote and non-remote area housing benefits and each are treated differently for tax purposes. It is not necessary for bankruptcy purposes to draw such a distinction. The formula for assessing the value of non-remote area housing benefits is applied to all housing benefits received by bankrupts for the purpose of assessing the income of the bankrupt during the contribution assessment period. Item 9 substitutes section 26 of the FBT Act with another section 26 which provides that the value of a housing fringe benefit in relation to a contribution assessment period is the portion of the market value of the recipient's current housing right that exceeds the recipient's rent.

Item 10 - Section 28 (Indexation factor for valuation purposes - non-remote housing)

Section 28 of the FBT Act provides an indexation formula for determining the taxable value of non-remote area housing. This provision is unnecessary for bankruptcy purposes, and accordingly, item 10 provides for its omission.

Item 11 - Section 29 (Taxable value of remote area accommodation)

Section 29 of the FBT Act specifies the method whereby the taxable value of remote area housing fringe benefits is ascertained. For bankruptcy purposes, no distinction is drawn between remote and non-remote housing fringe benefits and accordingly item 11 omitted section 29 as it is unnecessary.

Item 12 - Section 29A (Indexation factor for remote area accommodation)

Section 29A of the FBT Act sets out an indexation factor to be used in determining the taxable value of remote area accommodation. This section is unnecessary in the bankruptcy context since no distinction is drawn between remote and non-remote area accommodation fringe benefits. Item 12 omitted section 29A.

Item 13 - Section 31 (Taxable value of living-away-from-home allowance fringe benefits)

Section 31 of the FBT Act specifies the taxable value of living-away-from-home allowance fringe benefits. The taxable value of the benefit is the amount of the allowance less so much of it as is reasonable to compensate for the cost of accommodation away from home and for increased expenditure on food. Item 13 adds subsection 31(2). Subsection 31(2) defines the term 'deducted home consumption expenditure' in relation to the 'exempt food component' of a living-away-from-home allowance. The 'deducted home consumption expenditure' is taken to be an amount of $42 per week for a person 12 years of age or more and $21 for a person less than 12 years old - this is the same as the 'statutory food amount' specified in section 136 of the FBT Act.

The item also includes an example to show how the calculation of the value of a living-awayfrom-home allowance benefit is calculated.

Item 14 - Section 32 (Airline transport benefits)

Section 32 of the FBT Act provides that where air transport is provided to an employee of an airline operator or an employee of a travel agency on a free or discounted basis, the provision of the transport and any incidental services is deemed to be a fringe benefit. Item 14 amended section 32 of the FBT Act by omitting paragraph 32(c) which limits the benefit to air transport provided subject to standby restrictions that customarily apply in relation to the provision of airline transport to employees of the airline industry. Whether or not the bankrupts standby travel rights are subordinate to those of other airline passengers is not relevant to the valuation of the benefit thus derived.

Item 15 - Section 36 (Taxable value of board fringe benefits)

A board fringe benefit arises where the provider provides a 'board meal' to the recipient. Section 36 of the FBT Act sets out a formula for determination of the taxable value of a board benefit. Item 15 substituted section 36 with a formula whereby the value of a board benefit is taken to be $35 in relation to the year beginning 1 July 1992 or a contribution assessment period beginning on 1 July 1992. In subsequent years, the value of such a benefit is $35 increased by the All Groups Consumer Price Index.

Item 16 - Section 37 (Reduction of taxable value - "otherwise deductible" rule)

Section 37 provides for a reduction of the taxable value of a board fringe benefit in circumstances where the recipient would otherwise be entitled to an income tax deduction in relation to any expenditure incurred by the recipient. This reduction of value is not relevant for bankruptcy purposes, and item 16 omitted section 37.

Item 17 - Division 11 of Part III (Property fringe benefits)

Item 17 omitted Division 11 of Part III of the FBT Act which deals with property fringe benefits. The fringe benefits under the Division arise out of a disposal of the provider's interest in the property to the recipient. Any such property would be after acquired property which would vest in the trustee of the estate of the bankrupt.

Item 18 - Section 46 (year of tax in which residual benefits taxed)

Section 46 of the FBT Act sets down rules for determining in which year of tax residual fringe benefits, that is, benefits other than those falling in the specific categories of benefit which the FBT Act creates, should be taxed. Item 18 substituted section 46 with a provision for attributing residual fringe benefits received by a bankrupt over a period of two or more contribution assessment periods. Under section 46, where a residual fringe benefit is provided over two or more contribution assessment periods, the benefit is subject to assessment for income contribution in each of the periods in which it was received.

Item 19 - Section 48 (Taxable value of in-house non-period residual fringe benefits)

The FBT Act draws a distinction between 'in-house' and 'external' residual fringe benefits, and also between 'period' and 'non-period' residual benefits. All residual benefits are to be treated in the same manner for bankruptcy purposes and accordingly it is unnecessary to draw such distinctions. Item 19 omitted section 48 which sets out rules for determining the value of in-house, non-period residual benefits.

Item 20 - Section 49 (Taxable value of in-house period residual fringe benefits)

Item 20 omitted section 49 for the same reason that Item 19 omitted section 48.

Item 21 - Section 50 (Taxable value of external non-period residual fringe benefits)

Item 21 substituted section 50 of the FBT Act with another provision for ascertaining the value of residual fringe benefits for bankruptcy purposes. Section 50 provided that the value of a residual fringe benefit in relation to a contribution assessment period is the cost to the provider of providing the benefit, reduced by the amount of the recipient's contribution.

Item 22 - Section 51 (Taxable value of external period residual fringe benefits)

Item 22 omitted section 51 of the FBT Act for the same reason as items 19 and 20 omitted sections 48 and 49.

Item 23 - Division 14 (Reduction of taxable value of miscellaneous fringe benefits)

Division 14 of Part III of the FBT Act provides for the reduction of taxable value of miscellaneous fringe benefits, which is irrelevant in a bankruptcy context. Item 23 omitted the Division.

Item 24 - Division 14A (Amortisation of taxable value of fringe benefits relating to

Division 14A of Part III of the FBT Act deals with amortisation of remote area housing fringe benefits and is irrelevant in a bankruptcy context. Item 24 omitted Division 14A.

Item 25 - Division 14B (Reducible fringe benefits relating to remote area home ownership repurchase schemes)

Division 14B of Part III of the FBT Act deals with reducible fringe benefits relating to remote area home ownership repurchase schemes and is irrelevant in a bankruptcy context. Item 25 omitted Division 14B.

Item 26 - Section 136 (Interpretation)

Section 136 of the FBT Act defines a large number of terms used in the Act. Item 26 proposes the amendment of section 136 to insert some definitions necessary to enable the FBT Act provisions to apply in a bankruptcy context. A definition 'contribution assessment period' was inserted. This term has the same meaning as it does under the Bankruptcy Act 1966.

Item 26 also substitued the FBT Act definition of 'family member'. In the FBT Act, 'family member' is defined in relation to an employee. The definition has been expanded so as to define family member in relation to a bankrupt, as well as in relation to an employee.


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