PIR newsletter – December 2023

On this page

Christmas and New Year holiday operating hours

Australian Financial Security Authority will be closed over the Christmas holiday period from 5:30pm (AEDT) Friday 22 December 2023, and will reopen on Tuesday 2 January 2024.

If you intend to lodge an application or document, it is recommended that you submit it as soon as possible to allow sufficient time for processing.

During this time, limited emergency services will be available by calling 1300 364 785.

While AFSA will have limited available services during the break, online resources will still be available.

Please note that due to Christmas closure, processing times for applications will take longer to finalise.

During the close-down period our offices will not be accepting physical service of legal documents. The inbox for electronic service of legal documents will be monitored on a daily basis.

AFSA Inaugural Summit

The AFSA Inaugural Summit, held in Sydney on Wednesday 18 October, was an opportunity to help AFSA further build connections between leaders from across the credit ecosystem.

With the theme of ‘Building confidence through connection’, the Summit welcomed more than 100 invited attendees representing a range of areas including industry leaders, practitioners, advocacy groups and government.

Facilitated by esteemed journalist and broadcaster Jenny Brockie, panel conversations focused on how education, compliance and enforcement create a common understanding across the credit system.

In a fireside chat, attendees heard from Governor Michele Bullock from the Reserve Bank of Australia who shared her insights into the current economic climate and how these challenges may impact the credit system.

The Summit focused on the issue of unlicensed pre-insolvency advisors, discussing how partners across industry can connect to call out the bad actors who misuse the system and prey on those who are vulnerable.

Attendees also heard from key credit leaders on what’s impacting the system now, and how current lessons and the realities post-pandemic can assist us in maintaining a strong credit system for the future.

Government leaders spoke about how a user-first approach can change the connection to compliance for our clients – in particular, how technology can be used to support positive outcomes.

From a prevention lens, a cross-industry panel spoke on the value of financial capability in building financial security, with a particular focus on the changing demographics and debt profiles being seen across Australia following the pandemic.

The momentum doesn’t end here. AFSA looks forward to building on these conversations and connecting with more members of the credit system to address issues including financial education, untrustworthy advisors and more in 2024 and beyond.

2022-23 Annual Report released

AFSA has released its Annual Report 2022-23, highlighting the agency’s operations and achievements in the last financial year.

Throughout 2022-23, AFSA continued its work to become a visible, modern and contemporary regulator that supports a strong credit system for Australia.

The Annual Report outlines how AFSA is meeting its responsibilities by fostering positive economic and social outcomes and supporting people to interact positively with the credit system. The agency's work is underpinned by its efforts to scan the environment and respond to changes in the ecosystem.

Highlights from the year included:

  • Delivering world-class services, with survey results showing a 93.8% client satisfaction rate across almost 50,000 calls received
  • Developing the ‘State of the personal insolvency system’ report, providing stakeholders and government partners with valuable insights into trends and emerging issues in the system following the COVID-19 pandemic
  • Publishing the AFSA Vulnerability Framework, a 3-year approach which aims to deliver flexible services that minimise stress for people experiencing vulnerability, while providing extra support to those who need it.

During the financial year, there were a total of 9,930 personal insolvencies. Of these 5,844 were bankruptcies, 3,942 were debt agreements, 12 were personal insolvency agreements and 23 were deceased estates.

Use of the Personal Property Securities Register (PPSR) continued to grow during the 2022-23 financial year, with more than 11.8 million searches.

The full AFSA Annual Report 2022-23 is available for download at Annual reports.

September quarter Personal Insolvency and PPSR statistics

AFSA has released the Personal Insolvency and Personal Property Securities Register (PPSR) statistics for the September quarter 2023.

Personal insolvency

There were 3,108 new personal insolvencies in the 3-month period to September 2023 – up from 2,410 in September 2022.

National data shows personal insolvencies rose in all states and territories, except for the Northern Territory where numbers declined.

Of the September quarter 2023 personal insolvencies, just over a quarter were business-related (782).

The full data is available at Quarterly personal insolvency statistics.

PPSR

During the September quarter 2023, there were more than 3.2 million searches conducted – up 14.3% from the September quarter 2022. The most common search was for motor vehicles by serial number (51.5% of all searches).

During the same period, there were more than 550,000 new registrations created on the PPSR – an increase of 11% on the September quarter 2022. There were more than 295,000 amendments to registrations on the PPSR, and more than 410,000 registrations were discharged or removed.

The full PPSR data reports are available to download at PPSR quarterly statistics.

2023 wrap of AFSA enforcement actions and actions against system misuse

AFSA is committed to addressing system misuse, conducting investigations, and referring those who deliberately undermine the personal insolvency system and fail to comply with their legal obligations for prosecution.

During 2023, AFSA 44 persons were convicted of 74 offences.

In summary the more common successful prosecutions include: 

  • 33 successful prosecutions for defendants failing to file their Bankruptcy Form (s54 and 267B)
  • 19 successful prosecutions for defendants making a false declaration on their Bankruptcy Form (267(2))
  • 10 successful prosecutions for defendants disposing of property with intent to defeat creditors prior to and during bankruptcy (266(1) and (3))

Matters resolved this year included: 

  • A New South Wales man, Mr Mahfound Assi, was fined after pleading guilty to 4 counts of disposing of property within 12 months of filing for bankruptcy and one count of making a false declaration.
  • South Australian man Mr Gojko Ugrica was sentenced to more than 3 years imprisonment, with a non-parole period of 12 months after he pleaded guilty to multiple charges of fraud and dishonesty.
  • A New South Wales man was sentenced to 30 months to be served by way of intensive corrections order after pleading guilty to 8 counts of making a false claim with intent to defraud.
  • A financial services company in New South Wales received a conviction and a $10,000 fine after pleading guilty to not complying with bankruptcy orders relating to a former company .
  • A Queensland woman received a $1,500 fine and was ordered to repay more than $7,000 to a private school after failing to declare she was an undischarged bankrupt.
  • A New South Wales man was convicted and sentenced to serve 16 months' imprisonment by way of an intensive corrections order in the community, after pleading guilty to six counts of disposing of property prior to and during his bankruptcy with the intent to defraud his creditors and one count of making a false declaration on his bankruptcy form.
  • A Queensland man was sentenced to seven and a half years in prison after pleading guilty to nine charges including fraud, failure to disclose a bankruptcy and dealing with another entity's identity.
  • A Queensland man was sentenced to 18 months’ imprisonment, after pleading guilty to one count of disposing of property with intent to defraud creditors after bankruptcy. He was immediately released on parole and is subject to a 4-year good behaviour period.

Anyone can make a report if they suspect wrongdoing. Reports can be against a person that is declared bankrupt, a registered trustee or any person or company thought to have falsely registered a security interest in an item on the Personal Property Securities Register (PPSR).

There are two ways to report suspected wrongdoing:

When reporting suspected wrongdoing, the more information provided, the better AFSA can investigate.

Registered trustees and registered debt agreement administrators play a significant role in addressing the harms to the system. AFSA encourages practitioners to consider how you can protect vulnerable clients and reduce the potential negative impacts of unlicensed pre-insolvency advisors.

The importance of honesty in bankruptcy declarations

Declaring bankruptcy is not an easy decision. It is important to remind your clients that if they follow the process and are open and honest in their declarations, they will be better able to make a fresh start.

When you, or your staff, help a client to complete their Bankruptcy Form, it is important to remind them that it is an offence under the Bankruptcy Act 1966 (the Act) to make a false declaration.

In the last 5 years, there have been more than 1,200 referrals related to false declarations on Bankruptcy Forms. Most of these referrals have occurred because the debtor failed to complete the form accurately and honestly.

When a false declaration is discovered, AFSA’s first regulatory approach is to provide guidance to the debtor regarding a debtor’s obligations under the Act.

The most common areas that resulted in adverse enforcement actions were false or misleading information, or information that had simply been omitted. The majority of the false or missing information instances related to bank accounts, real estate, vehicles, and superannuation.

Where the offence is captured early and has no material impact on the administration of the estate, AFSA will issue Official Cautions as an enforcement mechanism.

If the false declaration is more severe and could have a material impact on the administration of the estate, AFSA will refer a brief of evidence to the Commonwealth Director of Public Prosecution (CDPP) for prosecution. Over the past 5 years, 60 people have been prosecuted for making false declarations on their Bankruptcy Form.

Remember, honesty is always the best policy.

For more information about submitting a Bankruptcy Form contact AFSA on 1300 364 785 or go to: Apply for bankruptcy or Submitting the Bankruptcy Form offline.

Applications to Inspector-General for determination of trustee remuneration

AFSA has observed that some trustees and firms make high rates of applications to the Inspector-General for determination of trustee remuneration, whilst others rarely apply. 

Ongoing and clear engagement with, and communication to, creditors about the status of an estate should take precedence. 

A key principle of the personal insolvency regime is that creditors should have primary control over remuneration in an administration.

The mechanism to make applications to the Inspector-General should not be considered as the primary way trustee remuneration can be approved.

IGPS15 - Determination of a trustee’s remuneration outlines the process by which trustees of a regulated debtor’s estate may apply to the Inspector-General in Bankruptcy.

Applications to the Inspector-General must be considered with regard to paragraphs 1.4 and 2 of this practice guidance.

Paragraph 3.5 outlines any “other relevant matters” the Inspector-General may consider when reviewing an application.

Data shows that during from August 2022 to September 2023:

  • 136 applications were received and dealt with (i.e. an outcome was achieved).
  • 7 firms submitted half of those applications.
  • 2 applications were rejected, 13 applications resulted in substituting a lesser amount and 6 applications were withdrawn.

From February 2023 to August 2023, further analysis found that 31 application forms needed to be returned due to the incorrect form being used or insufficient information being provided. Half of the 31 applications returned had been submitted by 5 of the 7 high-use firms.

AFSA recognises that creditor disengagement is an issue. Trustees however must consider what strategies could be implemented within their practice to favour better communication and engagement from creditors, if required. 

AFSA has also observed that applications may be defective due to an apparent insufficient consideration of each of the elements required by the legislation (under Rule 60-10 of the Insolvency Practice Rules (Bankruptcy) 2016). 

This may lead to further requests for information or documentation from delegates, delay in the processing of applications, use of time and resources that could be avoided, or in some cases the refusal of the application. 

Some of the issues observed include:

  • Incorrect application form used and documentation missing, which may lead to rejection of the applications. 
  • Apparent lack of understanding of the nature of the information required by the legislation and its intention. 
  • Potential lack of understanding about the role of the Inspector-General delegate, whose role is to stand in the shoes of the creditor. The trustee’s office should either provide or expect questions concerning the relevant events in the administration, the challenges administering the estate, and the appropriateness of the level of remuneration sought to be determined.
  • Absence of evidence demonstrating an effort to engage with creditors through an appropriate means of communication, such as via telephone in preference to a simple follow up email. 
  • Reliance on Work in Progress (WIP) incurred by a previous trustee without adequate submissions to illustrate the current trustee’s entitlement to that WIP. 
  • Potential lack of analysis and review of the WIP to ensure it is adequate in view of the circumstances of the administration, the hourly rates applied are commensurate with the degree of difficulty of the tasks undertaken, the allocation of the time has been made correctly and the narratives are sufficiently descriptive.

AFSA Practitioner Surveillance will continue to monitor all aspects of information included in applications, to inform our intelligence and monitoring activities.

For further guidance on remuneration applications, please refer to IGPS15 - Determination of a trustee’s remuneration.

Update from the ATO

The latest practitioner news from the Australian Taxation Office.

Debt Agreement Administrators – Utilising myGov for debt balance and lodgement enquiries

The ATO is receiving a large volume of requests from insolvency practitioners and debt agreement administrators requesting a full breakdown of their client’s tax liabilities prior to the client officially entering a Part IX Debt Agreement.

To significantly reduce the time taken to obtain this information, the ATO strongly encourage insolvency practitioners and debt agreement administrators to redirect these enquires to clients to obtain the information from ATO online services via myGov. The ATO can still be contacted in instances where clients do not have access to online services.

Why choose myGov?

  • Efficient accessibility and time savings – myGov provides seamless real-time access to tax records online and the associated information can be provided from the client to the debt agreement administrators with a faster turnaround. This saves administrators time and expedites the decision-making process for assisting clients in entering a Part IX Debt Agreement or Part X Personal Insolvency Agreement.
  • Accuracy - The client’s ATO online records provide a clear representation of:
  • Outstanding lodgements.
  • ATO debts.
  • If applicable, any Income Contingent Loan (ICL) debts including:
  • Higher Education Loan Program (HELP)
  • Student Start Up Loan (SSL)
  • ABSTUDY Student Start Up Loan (ABSTUDY SSL)
  • Trade Support Loan (TSL)
  • Student Financial Supplement Scheme (SFSS) and
  • VET Student Loan (VSL) debts.

Clients can use the ATO app or the myGov app to securely access ATO Online services.

The ATO values your feedback as it is important to continually improve processes to better serve you.

Please send your contact details to InsolvencyPractitionerServices@ato.gov.au

More information

For general information refer to the insolvency practitioners’ section on ato.gov.au/Tax-professionals/Your-practice/Insolvency-practitioners.