Unclaimed money

Unclaimed money (ORPS10)

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  1. INTRODUCTION

    1. This practice document outlines the process for and expectations regarding the payment of money to the Commonwealth by trustees and debt agreement administrators (hereafter referred to as practitioners) in accordance with section 254 of the Bankruptcy Act 1966 (“the Bankruptcy Act”).  It also explains the process for a person wishing to make a claim to the Official Receiver for money that was paid to the Commonwealth by a practitioner and how a claim will be assessed.
    2. References in this chapter to the Inspector-General and Official Receiver relate to specific roles performed by the appointed officials or their delegates in AFSA.  The remainder of this document refers to the Inspector-General, Official Receiver and AFSA in order to distinguish the roles or relevant delegations being exercised by AFSA.
  2. LEGISLATIVE OVERVIEW

    1. The Consolidated Revenue Fund

    2. Section 81 of the Commonwealth of Australia Constitution Act provides for one Consolidated Revenue Fund (“CRF”), formed from all revenue or money raised or received by the Executive Government of the Commonwealth.
    3. Section 81 states as follows.
    4. The CRF is self-executing, meaning all money paid to the Commonwealth (or any person or organisation acting on behalf of the Commonwealth) automatically forms part of the CRF.
    5. Money forms part of the CRF upon receipt by, or on behalf of, the Commonwealth.  This includes taxes, charges, levies, borrowings, loan repayments and money held in trust.
    6. Section 254 of the Bankruptcy Act

    7. Section 254 of the Bankruptcy Act provides for payments to the CRF of unclaimed money.  The provision also provides an avenue for a person believing they are entitled to money held in the CRF to make an application for payment.
    8. Section 254 states as follows.
  3. PAYMENTS TO THE CONSOLIDATED REVENUE FUND

    1. Pursuant to section 254 of the Bankruptcy Act, practitioners are required to make payments to the CRF where:
      1. any dividend or other money has remained unclaimed for a period exceeding 6 months
      2. the trustee holds money that they do not propose to distribute or pay to any person.
    2. Unclaimed dividends or other money for more than 6 months (subsection 254(2))

    3. This provision applies in situations where the trustee holds money and the person entitled to this money has been identified but cannot be located or contacted.
    4. In cases where a creditor is entitled to be paid a dividend or there is another payee entitled to payment and either no address is known or a previous payment has been returned unclaimed, the Bankruptcy Act requires the practitioner to take all reasonable steps to identify the intended payee’s whereabouts to effect payment.  What is “reasonable” will vary from administration to administration, and some suggestions for contacting a creditor or payee include:
      1. searching for the creditor and contact details on the internet
      2. asking the debtor or bankrupt for contact details
      3. making a phone call to the last known contact number for the creditor
      4. sending an email or sending a letter to the last known address
      5. in the case of a company that remains registered, conducting an Australian Securities & Investments Commission search for the company’s registered address.
    5. In cases where payment has been made to a person by cheque and the person does not present the cheque and the cheque is not returned, efforts are expected to be made to contact the payee using the last known contact details to make enquiries.  If needed, the enquiries in the previous paragraph can be undertaken to assist in contacting the payee to ascertain why the cheque was not presented.  Where appropriate, the cheque should be cancelled after a reasonable period and reissued when the creditor/payee is located.
    6. Where money is held for more than 6 months and all reasonable steps have been taken to locate the payee, and where these attempts have been unsuccessful, the money will need to be paid to the CRF.
    7. Where money is held and a decision is made not to pay it to anyone (subsection 254(2)(b))

    8. Where a practitioner holds money and proposes not to pay it to any person, this is required to be paid to the CRF.
    9. It is the Inspector-General’s position that paragraph 254(2)(b) of the Bankruptcy Act is confined to the following situations:
      1. it is not proposed to distribute or pay the money to any person because there is no person entitled to the money, for example the person entitled has died leaving no will, no dependants and no relatives
      2. where a relatively small amount is held by the practitioner and the cost of distributing this money to creditors would outweigh the benefit.
    10. Note that, if the money would otherwise be payable to a deregistered company, the entitlement to the money vests in the Australian Securities & Investments Commission, and so point 1 in the previous paragraph is not appliable.  More information is available on ASIC’s website.
    11. Where the source and entitlement to the money cannot be ascertained

    12. In cases where the practitioner has been unable to identify the payer of money received in an administration account and, consequently, cannot confirm the person(s) who is entitled to the money, section 254 of the Bankruptcy Act has no application.  However, this raises 2 questions for administrators:
      1. For how long is a practitioner expected to keep making attempts to identify the source of, and/or the person entitled to, the money?
      2. What should be done with the money after making appropriate but unsuccessful efforts to identify the source of the money and/or person entitled to it?
    13. The Inspector-General’s expectation in this situation is that the practitioner will make every reasonable effort to identify the source of the money.  What is “reasonable” will depend to a degree on the particular circumstances, but it is conceivable that a period of up to 12 months may be required for significant sums of money.  Money that remains unidentified despite reasonable efforts should be placed in a suspense account operated by the practitioner until the issue is resolved.
    14. The non-identification of money received by administrators can have significant consequences for a debtor who has a debt agreement in place because of the 3-month and 6-month arrears default (including non-completion 6 months after the date on which the agreement was due to be finalised) provisions of the Bankruptcy Act.  This could mean that, where a debtor has paid the money to the practitioner but the practitioner has not been able to confirm the source, the money may be applied to the wrong debt agreement and/or the debtor who did pay the money may see their debt agreement incorrectly terminated by operation of law.  As this is a significant consequence, practitioners administering debt agreements must ensure that all reasonable enquiries are made.
    15. How to pay money to the Commonwealth

    16. To pay money to the CRF, the practitioner is to electronically transfer the money to the following account:         
      1. Account name

        AFSA Administered Receipts

        BSB

        062987

        Account number

        10001950

    17. Pursuant to section 72 of the Bankruptcy Regulations 2021, the practitioner making the payment must complete the approved form and send it to the registry [at] afsa.gov.au (Official Receiver).  The approved form, which came into effect on 1 April 2021, has been designed to capture all the information the Official Receiver may need when determining a claim to the money at a later date.[1]
    18. Practitioners are encouraged to provide all relevant details on the form because it will be referenced at a later date if a person makes a claim to the money and, if there is insufficient information for the Official Receiver to determine a claim, the practitioner may be required to provide more details at a later date.
    19. Copies of the approved form and the AFSA receipt are to be maintained on the practitioner’s administration file.
    20. The expectations and role of the Inspector-General

    21. Practitioners are expected to have systems and controls in place to identify when money has been unclaimed for 6 months and processes in place to attempt to locate payees.
    22. Section 12 of the Bankruptcy Act provides the Inspector-General with the power to conduct investigations.  Where there are issues of concern identified during the annual compliance program or when a complaint is made, delegates of the Inspector-General will examine the issue in relation to unclaimed money with reference to the principles set out in this practice document.
    23. Where breaches of the law or a lack of record keeping are identified, the practitioner will be asked to take remedial action.  This may also lead to counselling or, in serious cases, to either litigation or disciplinary action being initiated.
  4. REFUNDS OF UNCLAIMED MONEY

    1. Where a person claims to be entitled to money that was paid to the CRF by a practitioner, an application can be made to the Official Receiver for a determination that the person is entitled to the money.  Such an application is made pursuant to subsection 254(3) of the Bankruptcy Act.  The Official Receiver will determine the application and, if satisfied that the person is entitled to the money and that the money has not already been paid out of the CRF, payment will be made.
    2. Examples of where this may be the case can include:
      • where the claimant was a creditor in a bankrupt estate and where the trustee intended to pay a dividend to the creditor but was unable to locate them
      • where there was money remaining in an administration that was due to be returned to a former bankrupt but where the former bankrupt could not be located
      • where a person entitled to the money had died and a beneficiary of that person’s estate claims the money.
    3. Making a claim

    4. Where a person wishes to claim entitlement to money that was transferred to the CRF, the claim is to be submitted to the Official Receiver by using the unclaimed moneys online form.
    5. The form is an approved form, which means that it is required to be used in order to make a claim and no other form can be used in its place.  Use of the form will also ensure that all necessary information is provided to enable the Official Receiver to consider the request.
    6. When the form has been completed, it is to be sent to the Official Receiver at registry [at] afsa.gov.au (preferred) or via post to:
      1. Australian Financial Security Authority
        GPO Box 1550
        ADELAIDE  SA  5001
    7. The decision process

    8. Following receipt of the claim form, the Official Receiver will then consider the information provided on the form.
    9. Where further information or evidence is required, a request for this will be made within 28 business days.
    10. The Official Receiver will consider the information provided by the person and must be satisfied that the person is entitled to the money in order for a refund to be provided.  The Official Receiver will take into account factors such as:
      • if the person claims to be a creditor in an administration, whether the trustee admitted the claim and for how much
      • whether the person’s identity can be verified
      • if the claim is being made on behalf of an entity, the person making the claim is authorised to act for the entity.
    11. As part of the decision process, the Official Receiver will consider the trustee’s approved form that was provided to the Official Receiver when the money was paid to the CRF.
    12. Where additional information is required from the trustee regarding the payment of the money to the CRF, the Official Receiver will contact the trustee’s office.  This may need to occur in situations where:
      • the trustee’s approved form was deficient
      • the amount being claimed is significant and the Official Receiver requires additional information to make a decision with certainty.
    13. The Official Receiver will make a decision within 28 business days of receipt of all necessary information.
    14. Notifying the claimant of the Official Receiver’s decision

    15. Where the Official Receiver is satisfied that the person who made the claim does have an entitlement to the money, or to part of the money claimed, the reasons for this decision and a notice of determination will be provided to the person.
    16. Where the Official Receiver is not satisfied that the person who made the claim does have an entitlement to the money, the reasons for this decision and a notice of determination will be provided to the person.  A person whose claim was denied in full or in part has a right of review to the Court.
    17. Facilitating the refund to the claimant

    18. Where a decision is made to refund an amount to the claimant, this will be processed as an account payable in the next AFSA departmental payment run.  While the decision regarding the claimant’s entitlement to the money will be made within 28 days of the receipt of all necessary evidence, the payment may take an additional 14 days to process.
    19. Refunds will be made via electronic funds transfer.
    20. Limitation of liability

    21. It is the responsibility of the claimant to ensure that the financial institution account details provided in the unclaimed moneys claim form are accurate.  Where a decision is made to refund an amount to the claimant, and where the money is transferred to the account specified in the claimant’s form but where those account details were incorrect, the Official Receiver will not be liable.  If that money is returned back to AFSA, the Official Receiver will take action to have them paid to the claimant; however, if the money is not returned to AFSA, the Official Receiver will take no further action.

Footnotes

[1] Prior to 1 April 2021, the practitioner was required to provide a statement in accordance with the former regulation 12.01 of the Bankruptcy Regulations 1996, but this statement was not required to be provided on a particular form