Referring offences against the Bankruptcy Act 1966 to the Inspector-General

Inspector-General Practice Statement 14 explains referring offences against the Bankruptcy Act 1966 to the Inspector-General.

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  1. Introduction

    1. The Australian Financial Security Authority (“AFSA”) investigates and, where appropriate, refers alleged offenders to the Commonwealth Director of Public Prosecutions (“CDPP”) for prosecution.  The decision to prosecute is made solely by the CDPP.
    2. This document provides guidance on when and how to refer possible, suspected or alleged offences to AFSA via the online offence referral webform.
    3. As delegates of the Inspector-General in Bankruptcy, AFSA officers may exercise powers under the Bankruptcy Act 1966 (“the Bankruptcy Act”) and the Bankruptcy Regulations 2021 (“the Regulations”).  References in this document to AFSA are generally references to delegates of the Inspector-General unless the context indicates otherwise.
    4. While any evidence of an offence must be referred to the Inspector-General, not every offence will be investigated.
    5. AFSA adopts a strategic harm-based approach taking several factors into account including whether:
      • the conduct or harm falls within the scope of AFSA's purpose and responsibilities
      • the conduct or harm falls within our current Regulatory Action Statement
      • the conduct or harm is of significant public interest
      • the conduct caused, or may cause, serious harm to an individual, business or group
      • the conduct represents widespread or systemic compliance issues
      • the conduct disproportionately targets an individual or group experiencing vulnerability
      • the conduct represents significant new or emerging issues, areas of law or regulatory action
      • the conduct is fraudulent, intentional or reckless, or the individual or business involved in the conduct is dishonest or has a history of disregard for compliance with AFSA legislation and standards
      • the conduct is sustained or is likely to be continued or repeated (including by others) or forms part of a pattern of conduct
      • any other factors specific to the matter which indicate AFSA intervention is warranted.
    6. We cannot pursue all matters that come to our attention. We may not pursue matters that we consider are:
      • one-off, isolated events with low level harm
      • more appropriately resolved between the parties
      • lacking in merit and intended to harass or cause undue distress
      • better considered by another regulator due to their expertise or jurisdiction.
    7. Further information is available in our Compliance and Enforcement Policy.
    8. All referrals contribute to our broader understanding of emerging risks, trends, and potential areas of concern. They assist AFSA to identify patterns and inform future enforcement priorities. 

    9. Practitioners’ duties and referrals

    10. The Official Trustee, registered trustees, debt agreement administrators and controlling trustees (broadly referred to as ‘practitioners’) play an important role in supporting the integrity of Australia’s personal insolvency system. Practitioners must act in a way that serves the operation of the Bankruptcy Act and that provides equality between creditors and fairness to a debtor or someone who is bankrupt.
    11. Sections 19, 185LA, 190 and 190A of the Bankruptcy Act outline the duties of registered trustees, debt agreement administrators and controlling trustees. In addition, the Insolvency Practice Rules (Bankruptcy) 2016(“the Rules”) outline general standards for registered trustees.
    12. Under the Bankruptcy Act, registered trustees, debt agreement administrators and controlling trustees have duties to:
      • look into the behaviour of a debtor or someone who is bankrupt to make sure they comply with their obligations under the Bankruptcy Act
      • consider whether a debtor or someone who is bankrupt has committed an offence against the Bankruptcy Act (section 19(h) of the Bankruptcy Act for trustees, section 185LA(d) of the Bankruptcy Act for debt agreement administrators and section 190A(d) of the Bankruptcy Act for controlling trustees)
      • refer evidence of any alleged offences to the Inspector-General or relevant law enforcement authority (section 19(i) of the Bankruptcy Act for trustees, section 185LA(e) for debt agreement administrators and section 190A(e) of the Bankruptcy Act for controlling trustees).
      • refer evidence of any offences to the Inspector-General or relevant law enforcement authority (section 19(i) of the Bankruptcy Act for trustees, section 1985LA(e) for debt agreement administrators and section 190A(e) of the Bankruptcy Act for controlling trustees)
    13. Practitioner referrals to AFSA are made via the AFSA webform, even if it is not clear if there is sufficient evidence to prove an offence or if there is uncertainty about any particular offence potentially having been committed
    14. An offence referral submitted to AFSA by a practitioner (or their staff) must be completed as follows:
      • Where the available evidence gives rise to a reasonable suspicion that an offence has been committed, the referral is to be fully and accurately completed, including all available details, and accompanied by relevant supporting attachments; or
      • Where the circumstances indicate a possibility or a lower level of suspicion that an offence has been committed, the referral may be limited to the completion of the minimum mandatory fields, using readily available information to enable submission, and may be submitted without attachments.
    15. Where a practitioner is in circumstances where it would be reasonable to suspect that a person (other than a bankrupt or debtor) has committed an offence under the Bankruptcy Act, AFSA expects that a fit and proper practitioner will submit an offence referral to AFSA. AFSA may, where lawful and appropriate, share relevant information with other agencies or law enforcement authorities.
    16. If a practitioner fails to submit an offence referral in such circumstances, AFSA may regard this as a breach of duty. For registered trustees and debt agreement administrators, a failure to submit an offence referral, or a failure to submit an offence referral in a timely manner, may also indicate that the practitioner is not a fit and proper person to remain registered.
    17. If AFSA believes a breach of duty has occurred, it will assess that conduct through standard AFSA processes to consider what further action may need to be taken. In circumstances where a breach is established the relevant disciplinary process and sanction may be considered. 

  2. Offences

    1. A list of offences[1] in the Bankruptcy Act, the Rules and the Regulations is available on the AFSA website:

  3. Objections to discharge

    1. Where non-compliance by a bankrupt is identified, and where this relates to any of the grounds provided in section 149D(1) of the Bankruptcy Act, an objection to discharge under section 149B of the Bankruptcy Act can be filed by the trustee.
    2. Objections to discharge can be lodged before or after making an offence referral as they can provide a swift remedy to assist in driving compliance with the Bankruptcy Act. Objections to discharge may influence a debtor or a person who is bankrupt to comply with their obligations in the knowledge that the objection to discharge will be withdrawn when compliance is achieved. See Objections to discharge from bankruptcy for more information about the lodgement of objections.
    3. Unless there is further utility in the objection to discharge remaining in place, it should be withdrawn when compliance with the action or inaction that led to its lodgement has been achieved.

  4. Knowledge of obligations

    1. The majority of offences in the Bankruptcy Act require evidence to prove that someone has intentionally or recklessly failed to comply with their obligations. There must be sufficient evidence to prove beyond a reasonable doubt that the person knew about their obligations at the relevant time.
    2. Evidence can include:
      • acknowledgement by a debtor or a person who is bankrupt that they have read the prescribed information (depending on the offence)
      • acknowledgment of receipt of a letter advising a person who is bankrupt of their obligations and responsibilities while bankrupt
      • proof of receipt of a request for information.
    3. Proof of notification in these instances can include:
      • An Australian Post delivery signed by intended recipient with follow up personal confirmation of receipt (email or phone with supporting file note)
      • an affidavit of personal service of documents[2]
      • detailed case notes by the practitioner detailing a conversation or meeting with the debtor or person who is bankrupt where:
        • their obligations are explained, including any legislative timeframes
        • directions are given
        • documents are served, and/or
        • they confirm correspondence has been received.
    4. Enforcement action is unlikely to occur where there is no proof that a bankrupt or debtor has been made aware of their obligations.

  5. Statement of affairs

    1. For sequestration order bankruptcies, the person who is bankrupt must file a statement of their affairs with the Official Receiver, and provide a copy to their trustee, within 14 days of being notified of their bankruptcy (also known as the Bankruptcy Form) under section 54 of the Bankruptcy Act. If they fail to do so, the trustee should then consider making an application to the Official Receiver to issue a section 77CA notice.
    2. Any practitioner referring an alleged offence for non-compliance of section 54 of the Bankruptcy Act, should also (noting points Section 77CA notices section below)), consider making an application to Official Receiver for a section 77CA notice to be issued, as these notices assist in driving compliance with the Bankruptcy Act.

  6. Section 77CA notices

    1. A trustee can request that AFSA (in its capacity as the Official Receiver) issue a section 77CA notice if:
      • a statement of affairs has not been filed; and
      • the trustee has evidence that the person who is bankrupt is aware of their bankruptcy and the obligation to file a statement of affairs.
    2. If a section 77CA notice is issued and successfully served on the person who is bankrupt, the trustee does not need to refer the offence for non-compliance with the notice to AFSA as this will be completed by the Official Receiver.
    3. Personal service of the 77CA notice is preferred to assist in proving the notice was served on the person.
    4. More information about section 77CA notices is available in Official Receiver notices.

  7. False declarations

    1. A debtor or person who is bankrupt might omit or provide false information in their:
      • bankruptcy statement of affairs
      • debt agreement statement of affairs
      • debt agreement proposal and explanatory statement
      • personal insolvency agreement statement of affairs, and/or
      • statement of income.
    2. In these circumstances, evidence to prove the person making the declaration knew it was false will be required to substantiate an offence under section 267(2) or section265(1)(f)[3]of the Bankruptcy Act.
    3. Under section 6A(3) if a trustee has reasonable grounds to suspect that a statement of affairs is false, misleading or missing information they can require that the person provide information or books to allow the trustee to decide whether the particulars in the Statement of Affairs is correct or not. Failure to provide the required information is an offence against section 267B(1).

  8. Time for commencement of prosecution action

    1. Offences punishable by a term of imprisonment of 6 months or less, generally have a 12-month statutory period of limitations. This means any prosecution action must start within 12 months of the offence being committed[4]. This is why it is important that practitioners submit alleged offence referrals in a timely manner.
    2. For example, a person who is bankrupt has 21 days after the end of their contribution assessment period (CAP) to provide to their trustee a statement containing information about their income. If the person who is bankrupt fails to provide the statement to their trustee within this 21-day time frame, the person will commit the offence on the 22nd day after the end of the CAP, being the first day of the offence. As the maximum sentence for this offence is 6 months imprisonment, a prosecution must be commenced within 12 months from the date of the first day of the offence.
    3. These offences include, but are not limited to sections, 139U(1), 139ZIE(6), 139ZIEA(6), 139ZO(1), 185EC(6), 185MC(6) and 185PC(6) of the Bankruptcy Act.
    4. Practitioners must submit these types of alleged offence referrals at the earliest opportunity to ensure there is sufficient time to investigate and for the CDPP to review a brief of evidence. Some alleged offence referrals received close to the statute of limitations may not be able to be prosecuted but should still be referred as all referrals contribute to our broader understanding of emerging risks, trends, and potential areas of concern. They assist AFSA to identify patterns and inform future enforcement priorities.

  9. Referral process

    1. An alleged offence referral is submitted online.
    2. If there are multiple alleged offenders, for privacy reasons, a separate form must be completed for each alleged offender. Separate referrals will ensure the conduct and evidence relevant to each specific alleged offender is easily identifiable.
    3. Referrals must include documents and attachments, if unable to attach all documents due to file size restrictions, additional attachments can be sent to E:ISI@afsa.gova.u. Documents and attachments to be provided include (but are not limited to):
      • copies of all relevant letters and emails sent to the alleged offender that relate to the allegation(s)
      • copies of all relevant file notes
      • copies of relevant Bankruptcy Act notices (e.g. sections 77C, 77A, 139V, 139ZL and section 6A(3) of the Bankruptcy Act), if applicable
      • proof of service/notification, if applicable
      • copies of any other information or documents that relate to the allegation (e.g. bank statements, title searches, account applications, loan documentation).
    4. AFSA cannot assess a referral properly unless the referral includes sufficient information and evidence about the alleged offender and their behaviour. AFSA may request further information if insufficient evidence is provided. If insufficient evidence is provided, AFSA may reject or take no further action on a referral. If a referrer is unsure if a piece of information is relevant, it should be attached.
    5. While it is expected that all relevant information is supplied with the referral in the first instance, if crucial information is missing, AFSA may request additional information from the referrer to support the allegation and will provide 48 hours to respond. This ensures that the high volume of referrals received by AFSA can be assessed in a timely manner. A referrer can request further time to respond if required. If no response is received, the referral will be assessed based on the information already supplied.

  10. Common errors and tips

    1. Common errors occur that prevent alleged offence referrals from being investigated. These include:
    2. Unable to prove knowledge of obligations.
      for most offending conduct a person must be aware of their obligations.
    3. Unable to prove service of requests or directions.
      there must be evidence that any requests or directions have been received by the recipient.
    4. Compliance time frame expired prior to receipt of request or direction or was unreasonable.
      Requests or directions cannot be enforced where confirmed receipt of the request or direction was close to or after the compliance due date. It is advisable to make any compliance time frame commence from the date of receipt of the request or direction, unless the Bankruptcy Act provides otherwise (e.g. section 139U of the Bankruptcy Act).
      Time frames must also be reasonable. Where a large volume of information is required to be produced, it is only reasonable that a greater compliance time frame is provided. Unreasonable timeframes cannot be enforced. It is noted that some provisions of the Bankruptcy Act provide a minimum timeframe that must be allowed for compliance (e.g. section 6A(3) of the Bankruptcy Act).
    5. Extensions given to compliance timeframes.
      Any extension of time given either deliberately or accidentally in relation to a formal notice (e.g. under section 6A(3), 77A or section 139V of the Bankruptcy Act) will invalidate the notice, making it unenforceable. Where a request for extension is made and the request appears reasonable in the circumstances, a fresh notice should be issued providing a reasonable timeframe. Extensions of time given in relation to other requests or directions (i.e. those that are not formal notices) will not make them unenforceable.
    6. Non-compliance with legislation – 77A.
      Requests or directions that are not compliant with the legislation cannot be enforced. For example, requests given under section 77A of the Bankruptcy Act requiring the production of books cannot include demands for payment of money or for provision of information outside the scope of section 77A. A request made under this section must be for books (defined in the act) that are already in existence. Requests should not be for copies, summaries or anything else that implies that the person receiving the notice is required to create a document that does not already exist.
    7. Non-compliance with the legislation – 139U
      A person who is bankrupt is allowed 21 days after the end of the CAP to give the required information under section 139U(1) of the Bankruptcy Act. If a trustee requests this information with a different due date, it will invalidate the request, and no enforcement outcome will be possible. Any information requested for the purpose of a CAP must be made under section 139U of the Bankruptcy Act only. A person who is bankrupt cannot be prosecuted under section 265(1)(ca) of the Bankruptcy Act for failure to provide income information if the information was required for the purpose of making an income assessment. A person must be made aware of the requirement to supply income information under this section for each CAP.

Footnotes

[1] Offences subject to the Infringement Notice Regime are dealt with separately to the guidance in this document. See Infringement notices.

[2] The other options for serving documents mentioned in section 102 of the Regulations are, by themselves, insufficient to satisfy criminal prosecution standards.

[3] Section 265(1)(f) of the Bankruptcy Act is not applicable to statement of affairs accompanying a debtor’s petition.

[4] See section 15B Crimes Act 1914.