Inspector-General Practice Statement 12

IGPS 12 - Statutory reviews of trustees' decisions under the Bankruptcy Act 1966 by the Inspector-General in Bankruptcy
Date of release: 
December 2012
Last updated: 
November 2018

1. Introduction

1.1 The purpose of this document is to explain the approach taken by the Inspector-General in Bankruptcy when carrying out statutory reviews of bankruptcy trustees’ decisions, together with the Inspector-General’s expectations with respect to requests for review.

1.2 In the course of administering a bankrupt estate, a bankruptcy trustee is required to make a number of decisions in order to carry out the duties required by law. Bankruptcy trustees include both private individuals registered to be bankruptcy trustees in Australia and the Official Trustee, the government's bankruptcy trustee.

1.3 The Bankruptcy Act 1966 (the Act) sets out types of decisions that a bankruptcy trustee can make which may be reviewed by the Inspector- General. Delegates within AFSA Regulation an independent division of AFSA, undertake these reviews on behalf of the Inspector-General.

The review areas are:

  • Filing of a notice of objection to discharge
  • Issuing an income contribution assessment
  • Deciding on and or refusing to consider a hardship application with respect to an income contribution assessment
  • Using a supervised bank account to collect income contributions
  • Paying trustee’s remuneration and third party costs (e.g. legal costs)

1.4 AFSA Regulation may also be requested to approve a registered trustee’s remuneration in certain circumstances upon application to the Inspector-General by the trustee. Further information on the remuneration approval process is contained in Inspector-General Practice Statement 15.

1.5 Creditors and the bankrupt/debtor may also apply to AFSA Regulation for review of a registered trustee’s claim for remuneration in an estate. Further information on the remuneration review process is contained in Inspector-General Practice Statement 16.

1.6 AFSA Regulation does not have the power to review other decisions that may be made by a trustee in the course of administering an estate. However, AFSA Regulation deals with complaints concerning bankruptcy trustees and may be able to assist in resolving disputes particularly if the trustee’s decision or action does not comply with the law or the industry standards. The process for lodging a complaint is dealt with in the AFSA fact sheet “Resolving complaints about trustees and administrators.”

1.7 For information about how to request a review, see the AFSA fact sheet Can I appeal?

2. General practice, expectations and requirements

2.1 Section 139ZA of the Act provides a bankrupt with a right to request in writing for a review by the Inspector-General in Bankruptcy of a trustee’s decisions regarding income contribution assessments and any decisions not to adjust contribution assessments based on hardship. Section 139ZIO provides the bankrupt with a right to request in writing a review relating to a trustee’s use of supervised accounts to collect contributions.

2.2 If appropriate AFSA will endeavor to assist in facilitating an amicable resolution between the parties where the outcome is likely to be either;

  • The applicant withdraws the application; or
  • The Trustee withdraws his/her decision.

2.3 In respect to objections lodged to extend the period of bankruptcy, the right to seek a review is provided in section 149K.

2.4 The comments in this general section apply to all types of reviews listed, apart from a trustee’s decision to claim remuneration.

3. How an Inspector-General review can be initiated

3.1 An Inspector-General review can arise:

a. if requested by a bankrupt and a delegate of the Inspector-General considers the reasons provided are sufficient to justify the review

b. on Inspector-General’s own initiative

c. if requested by the Commonwealth Ombudsman.

Request for review by the bankrupt

3.2 The trustee is required to advise the bankrupt of the decision, the bankrupt’s right of review and the 60-day time limit to request a review. The 60 day period starts on the day after the date the bankrupt is notified of the decision.

3.3 A Request to review a trustee’s decision must:

  • be made within 60 days of being notified of the decision
  • be in writing and forwarded to AFSA's Inspector-General
  • include the reason for requesting the review and
  • be accompanied by all relevant information and documentation, including a copy of the trustee’s decision on which review is being sought.

3.4 A request is considered once all of these conditions are met.

3.5 In determining whether the request is within time, AFSA Regulation requires evidence from the trustee as to when the decision and details of the review rights were provided to the bankrupt. 

3.6 A decision posted by the trustee is deemed to have been received by the bankrupt when a document would, in the due course of post or business practice, be delivered (refer Regulations 16.01). This is by reference to the Australia Post-delivery standards, which can be found on the Australia Post website.

3.7 Once a request for review meeting the prerequisite conditions is received, AFSA Regulation has 60 days to reach a decision. If a decision is not made within this time, for example if further information is not provided on request, the trustee’s original decision is deemed to be confirmed. AFSA Regulation will promptly advise the bankrupt of all decisions and further review options.

3.8 When the conditions are not met, for example, if AFSA Regulation determines that it is out of time, it is not considered as valid and a review will usually not be made based on the request. AFSA Regulation will provide an explanatory letter to the bankrupt outlining the reasons and any further entitlements of the rights of appeal.

3.9 While the determination of validity of a request is not reviewable in the Administrative Appeals Tribunal (AAT), a bankrupt is entitled to raise concerns with the Commonwealth Ombudsman who may direct the Inspector-General to undertake a review notwithstanding it being invalid or, if there are sufficient and reasonable grounds, AFSA Regulation may undertake a review based on its own initiative. Details of both are provided below.

Review carried out on the Inspector-General’s initiative

3.10 AFSA Regulation has the discretion to undertake a review of a trustee’s decision at any time. AFSA Regulation will exercise this discretion reasonably based on the merits and circumstances of each case.

3.11 Examples for instances where reviews may be carried out on the Inspector-General’s initiative are;

  • Intervention is required in order to maintain the credibility of the personal insolvency system. For example, if it was considered that the decision made was a misuse of power by the trustee.
  • It appears that a trustee’s decision was deemed to be a breach of fiduciary duties or otherwise contrary to law.
  • Natural justice should be applied. For example, where the request was received by AFSA Regulation outside the time frame allowed because the bankrupt had not been advised of their right of review or advised of the time limit within which to make such a request, and it appears there may be some merit in undertaking a review. AFSA Regulation may become aware of a trustee’s decision that should be reviewed using this discretion when performing other regulatory functions, such as during the annual inspection program or during the investigation of a complaint.

3.12 AFSA Regulation will advise the trustee of the basis of any cases where this discretion is invoked and it has been decided to review the trustee’s decision.

3.13 Where a decision to exercise the discretion is based on a request by the bankrupt, it is expected that the bankrupt will provide their reasons for requesting a review and this should be supported by all relevant information and documentation.

3.14 Although the Act does not specify a time-frame within which such a review decision must be made, AFSA Regulation will endeavor to complete the review within 60 days of accepting the review application.

Request for review by the Commonwealth Ombudsman

3.15 AFSA Regulation must conduct a review when requested to do so by the Commonwealth Ombudsman.

3.16 Examples of when this might occur are if the Commonwealth Ombudsman considers that an administrative error has occurred in the process or there is an issue of natural justice not previously considered.

3.17 Although the Act does not specify a time-frame within which a review must be completed in this situation, AFSA Regulation and Enforcement will endeavor to complete the review within 60 days of receiving the request from the Commonwealth Ombudsman.

How AFSA Regulation conducts a review

3.18 When AFSA Regulation determines that a review will be conducted, notification will be sent to the bankrupt and the trustee. The trustee will be advised of the reasons for the decision to undertake the review, or the basis of the bankrupt’s request. Further information will be requested from the bankrupt and/or the trustee where necessary.

3.19 It is expected that information requested will be provided by the bankrupt and/or the trustee within the time specified by AFSA Regulation.

Regulation’s notification

3.20 Where additional evidence is provided or where existing evidence has been challenged, and which will be relied upon by the Inspector-General in making its decision, parties will be given the opportunity to respond to the fresh evidence or issues raised.

3.21 Once the review is completed, AFSA Regulation will provide a written determination to the bankrupt, setting out the decision, the material upon which the decision was based and the reasons for the decision. A copy of the decision will also be provided to the trustee.

4. Income contribution reviews

4.1 A trustee is required to undertake periodic assessments of a bankrupt’s income to determine if there is a liability to contribute to the bankrupt estate. A decision resulting in a bankrupt’s obligations to make contributions is reviewable by AFSA Regulation on request by the bankrupt.

4.2 AFSA Regulation expects that the trustee will conduct a proper enquiry to assess the bankrupt’s contribution liability. The trustee should provide sufficient information to enable the bankrupt to understand how the liability was determined and inform the bankrupt of the review rights.

4.3 AFSA Regulation has the power to review an entire income contribution assessment and is not restricted to considering only the areas of the assessment which the bankrupt disputes.

4.4 In commencing a review, AFSA Regulation will initially consider the details of the trustee’s assessment, take into account information provided by the bankrupt and determine whether the trustee has correctly applied the contribution regime.

4.5 This process involves a review of the bankrupt’s income, the treatment of the liability for income tax and the number of dependants the bankrupt has as appropriate.

4.6. The possible outcomes of the review are that AFSA Regulation can:

a. confirm the trustee’s assessment or

b. issue a fresh assessment which either increases or decreases the contribution liability.

Hardship reviews

4.7. Where a bankrupt receives notice of an income contribution assessment, an application can be made by the bankrupt to the trustee if the bankrupt believes that financial hardship will be suffered if required to pay that contribution.

4.8 The grounds on which hardship can be claimed are set out in subsection 139T (2) of the Act. These are the only grounds on which hardship can be claimed and neither the trustee nor AFSA Regulation has the discretion to make an allowance and reduce the contribution liability on any other basis.

4.9 Where the bankrupt is not satisfied with the decision made by the trustee in relation to the claim for hardship, the bankrupt can ask for that decision to be reviewed by AFSA Regulation

4.10 In seeking a review in order to establish hardship it is necessary for a bankrupt to:

a. outline which of the hardship ground(s) in subsection 139T(2) applies

b. provide adequate evidence in support of the ground(s)

c. quantify the amount of hardship relating to the hardship ground(s) being relied on

d. demonstrate that financial hardship will be experienced if required to pay the assessed the contribution

4.11 Where AFSA Regulation determines hardship will be suffered by the bankrupt, after taking into account the matters above, AFSA Regulation may vary the contribution assessment to lower the contribution liability.

Review of supervised account notices

4.12 Where a bankrupt is issued with an income assessment and fails to make the required payments, the trustee can issue a supervised account notice on the bankrupt. The effect of the notice is that the bankrupt 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.

4.13 The main factors which AFSA Regulation considers when reviewing the notice are:

a. whether the bankrupt was liable to pay a contribution

b. whether amounts due have been paid

c. whether the bankrupt has failed to pay a lump sum or instalments due by a particular time

d. whether the bankrupt has been given an opportunity to comply voluntarily

e. whether the issue of the notice was an abuse of power or breach of fiduciary duty to act fairly and impartially.

4.14 In undertaking a review of a supervised account notice AFSA Regulation can:

a. confirm the decision

b. vary the decision

c. set aside the decision or

d. set aside the decision and make a decision in substitute of the decision in which is set aside.

4.15 These provisions do not apply to the situation when the bankrupt disagrees with the contribution assessment on which the supervised account notice is based. A request for review of the contribution assessment should be made as set out above and the conditions outlined above apply. If the conditions are not met, for example the request is out of time, AFSA Regulation may still utilise the discretion provided to review the basis of the contribution assessment alongside the review of the supervised account notice if the circumstances warrant such a decision.

5. Review of objections to discharge

5.1 A bankrupt is generally entitled to receive an automatic discharge from bankruptcy three years after the date on which the bankrupt’s statement of affairs1 was filed. A bankruptcy trustee must lodge an objection to a bankrupt’s automatic discharge from bankruptcy pursuant to section 149B when the trustee believes:

a. that doing so will help make the bankrupt discharge a duty that the bankrupt has not discharged

b. that there is no other way for the trustee to induce the bankrupt to discharge any duties that the bankrupt has not discharged.

5.2 The trustee must also determine that at least one of the grounds of objection, as set out in subsection 149D (1) of the Act, applies. The notice must be lodged with AFSA's Official Receiver and a copy of the notice provided to the bankrupt.

5.3 Where an objection is lodged with AFSA on or before the due for date discharge, the period of bankruptcy will be extended to either five or eight years from the date the bankrupt filed a statement of affairs. The period of bankruptcy will depend on which ground(s) of objection the objection is based.

5.4 Generally, a ground of objection that results in an eight-year bankruptcy is referred to as a “special ground”. Ordinary grounds of objection, referred to as non- special grounds in the legislation, generally give rise to a five-year period of bankruptcy.

Information that a notice of objection must contain

5.5 A notice of objection must include the following:

  • details of the ground(s) the trustee relies on to lodge the objection and the ground(s) must be specified in subsection 149D (1) of the Act the
  • evidence or other material upon which the trustee relies
  • where an ordinary or non-special ground is relied on, a statement of the trustee’s reasons for filing a notice of objection on that ground. (For special grounds, the trustee is not required to state the reason for objecting on that ground.)

5.6 AFSA Regulation’s expectation is that the trustee will set out clearly all of the above information in the notice of objection and that the copy of the notice will be given to the bankrupt within seven days after the lodging of the notice with AFSA. The bankrupt must be advised of the review provisions and the time-frame for seeking a review.

5.7 If the notice is deficient in any one or more of these requirements, it may be cancelled by AFSA Regulation or declared invalid by the court. If there are material deficiencies with the trustee’s notice of objection, AFSA regulation may request the trustee to consider withdrawing the notice.

How AFSA Regulation conducts an objection review

5.8 AFSA Regulation will review the decision to object and the notice of objection to ensure that the requirements of the Act have been complied with. AFSA Regulation can ask the bankrupt and/or the trustee for further information to assist with the review process. In appropriate circumstances, AFSA Regulation may seek to facilitate a resolution of the issues in dispute between the trustee and the bankrupt.

5.9 When conducting the objection review AFSA Regulation will consider the following:

  • Is the ground(s) of objection on which the objection was made ground(s) specified in subsection 149D (1)?
  • Is there sufficient evidence to support the existence of the ground(s) of objection?
  • Where the objection is based on a non-special ground, do the reasons given for objecting on that ground(s) justify the making of the objection?

5.10 If AFSA Regulation is not satisfied as to one or all of the elements above, the objection must be cancelled.

5.11 Where additional evidence is provided or where existing evidence has been challenged, and which will be relied upon by the Inspector-General in making its decision, parties will be given the opportunity to respond to the fresh evidence or issues raised as a matter of natural justice.

5.12 Where an objection is cancelled by the Inspector-General, the cancellation does not take effect until either:

a. the end of 28 days from the date that the bankrupt and the trustee receive the Inspector- General’s decision, being the period within which an application can be made for a review of that decision to the Administrative Appeals Tribunal (AAT) or

b. if such an application is made, the decision of the Tribunal is given.

5.13 AFSA Regulation will advise the AFSA Official Receiver where an objection has been cancelled so that the National Personal Insolvency Index (NPII) can be updated.

5.14 Once an objection based on a certain set of circumstances has been cancelled a trustee is unable to lodge a fresh objection based on the same ground and circumstances.

Considerations for special grounds

5.15 Where a ground of objection is a special ground, a trustee is not required to state the reason(s) for the objection

5.16 The Inspector-General may cancel a special ground of objection where:

i. The grounds and/or evidence are not established or

ii. The grounds and evidence have been established but the bankrupt has satisfied the Inspector-General that there was a reasonable excuse for the conduct or failure that gave rise to the special ground.

5.17 AFSA Regulation will consider the information and evidence provided by the bankrupt and rely on case law as appropriate to determine whether or not the excuse offered is 'reasonable'. The trustee will be given details of the claims and the opportunity to provide comments and evidence refuting the claim to have a reasonable excuse. Consideration will be given to the conduct of the bankrupt, and the circumstances of the administration of the bankrupt estate.

5.18 If the bankrupt submits that they had a prior reasonable excuse for failing to discharge the duty on which the notice is based, but despite subsequent opportunity, is still to remedy the conduct giving rise to the objection, the excuse provided will be unlikely to be accepted as the reason for the failure to comply.

5.19 AFSA Regulation has no power to cancel the objection based on special grounds simply because the conduct or circumstances which led to the objection has since been remedied. However, in cases where the conduct which gave rise to the objection has been remedied, it is AFSA Regulation’s expectation that the trustee will withdraw the objection unless there is some future benefit in the objection being maintained.

Considerations for non-special grounds

5.20 Where an objection is lodged on an ordinary or non-special ground, the trustee must specify a reason for the making of the objection on that ground. The objection must not be lodged to punish the bankrupt but must set out what purpose it seeks to achieve. It must state how the extension of the period of bankruptcy will provide a utility not otherwise available were the bankrupt to be discharged from bankruptcy.

5.21 The courts have considered the following examples to be valid reasons demonstrating utility in certain circumstances:

a. to provide the bankrupt the opportunity to co-operate more fully with the trustee in the administration of his or her estate and to more comprehensively meet his or her obligations to be forthcoming and frank in the information provided to the trustee, particularly when their obligation of full disclosure and duty to assist the trustee to the utmost of their power would be significantly reduced if they were to be discharged from bankruptcy

b. as a matter of public interest by ensuring that a bankrupt meets their requirements of transparency and candour under the Act so as to assist the trustee to the utmost of their power.

5.22 Guidance for trustees on the proper use of the objection to discharge provisions is available in the Inspector-General Practice Direction 7.

6. Review of Inspector-General decisions

6.1 If, after AFSA Regulation’s review of the trustee’s decision, either the trustee or the bankrupt is not satisfied with the outcome, they can apply to the Administrative Appeals Tribunal (AAT) for a review of the decision.

6.2 If an application for review is made within time, but AFSA Regulation refuse to perform a review, this decision is also able to be reviewed by application to the AAT.

6.3 The AAT appeal process requires an application to be made in writing in accordance with the prescribed application form available from the AAT web-site. “”. The application must set out a statement of reasons for the application and be made within 28 days of receipt of AFSA Regulation’s decision.

6.4 The role of the AAT in the review process is to make a decision afresh based on the law and the evidence available.

6.5 The proceedings are not adversarial in nature and AFSA Regulation’s role is to assist the AAT by providing the information required to allow the Tribunal to determine the correct decision in the circumstances.

6.6 Further details of the process involved in making an application to the AAT can be obtained from the AAT website.

6.7 The AAT does not have the authority to review other administrative decisions made by AFSA If a bankrupt is otherwise aggrieved, for example by the refusal of AFSA Regulation to accept an application as a valid request to review a decision, or its refusal to exercise the discretion to review the trustee's decision, a bankrupt has the right to complain to the Commonwealth Ombudsman. They may also be able to apply under the Administrative Decisions Judicial Review Act (ADJR Act) for a review of any decision made by an Australian public servant.


1 From 1 January 2020, the debtor’s petition and statement of affairs were combined into the Bankruptcy Form. The Bankruptcy Form is also used by a person made bankrupt via sequestration order, in place of the former statement of affairs. References in this guidance document to a statement of affairs can be taken to also refer to the Bankruptcy Form.