Income contributions

Official Trustee Practice Statement 1 explains income contributions in bankruptcy.

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  1. Introduction

    1. Overview

    2. The Bankruptcy Act 1966 (the Act) does not restrict a bankrupt from being employed and earning an income[1]. There are also no restrictions on the amount of income a bankrupt may earn. However, if the bankrupt's income exceeds a certain amount, the bankrupt will have to pay a portion of their income, to their trustee. This is called an income contribution.
    3. The income contribution system places an obligation onto bankrupts to make payments towards their estate when their income exceeds the statutory threshold amount. The Act also provides powers to trustees to recover those contributions.
    4. The amount payable is calculated by the trustee, based on a formula specified in the Act. The threshold at which contributions start to become payable is also determined by legislation and is not at the discretion of the trustee.
    5. The definition of income, for contributions purposes, is wider than that for income tax purposes. This means that a bankrupt's taxable income will not necessarily be the same as their assessed income for contributions purposes.
    6. The process

    7. The trustee assesses a bankrupt's contribution liability each year (or part-year) of bankruptcy. Each year (or part-year) is called a contribution assessment period (CAP).
    8. By completing an assessment as early as possible, the bankrupt is provided with ample time to pay the amount, within the CAP. This also means that the bankrupt has an opportunity to pay their final CAP liability before the end of the bankruptcy (although the trustee does still have the power to collect outstanding balances after the bankrupt has been discharged). Where the bankrupt's income changes, or there is another change that affects the liability during the CAP, such as a change in the number of dependants, or a change in income earned, a reassessment can be performed at any time.
    9. In a situation where a bankrupt believes that their income is below the threshold and that income contributions will not be required, the trustee still has a duty under the Act to ask questions and obtain information about the bankrupt's income and to prepare an assessment. Penalties can be imposed if the bankrupt fails to provide the necessary information.
  2. Calculation of a bankrupt's liability

    1. Formula

    2. The formula for calculating a contribution liability is contained in section 139S of the Bankruptcy Act and is:

      [Assessed income less Actual Income Threshold Amount]
      divided by 2

    3. Assessed income includes income from all sources less income tax, Medicare levy, Medicare levy surcharge and child support or maintenance paid pursuant to the Family Law Act 1975 or an order that has been registered in or approved by a Court in Australia. A maintenance order also includes an assessment made under the Child Support (assessment) Act 1989. In all cases, the reduction is limited to the amount the bankrupt could be liable to pay under the Child Support (assessment) Act 1989. Informal arrangements that do not meet these criteria are not eligible to be included in the reduction.
    4. Contribution assessment periods will usually span over two financial years. This means that the bankrupt may be subject to two different rates of income tax for the one CAP. For example, a CAP that starts on 1 October will have nine months in the current financial year and three months in the next financial year. The MoneySmart website has a tax calculator which can be used to estimate the tax and medicare amounts. These calculations and estimations will usually only be applicable for the first, estimated assessment (refer below at paragraph 5 for details on the assessment process). The subsequent assessments will normally be based on the tax actually paid by the bankrupt – this will usually be performed with reference to the bankrupt’s tax records such as their PAYG statements and taxation notice of assessment.
    5. The actual income threshold amount (AITA) that applies to a bankrupt is a set dollar amount that takes into account the number of dependants that the bankrupt has. It is calculated with reference to the base income threshold amount (BITA) and is updated twice a year in March and September. The AITA and BITA are defined in section 139K of the Act and the thresholds can be found on the indexed amounts page on AFSA's website.
    6. Dependants

    7. The AITA that applies to a particular bankrupt in a particular CAP depends on the number of dependants that the bankrupt has.
    8. When a bankrupt claims to have one or more dependants, the trustee may require evidence of dependency and the provisions made, and, if this is not supplied, the lowest AITA will be applied (thereby increasing the contributions payable).
    9. A dependant is defined in section 139K of the Act as a person who, during the relevant CAP:
      • resides with the bankrupt
      • is wholly or partly dependent on the bankrupt for economic support, and
      • earns less income than the amount prescribed in section 36 of the Bankruptcy Regulations 2021.
    10. The prescribed amount that a person may earn before they are no longer considered a dependant is found on the indexed amounts page on AFSA's website.
    11. The definition of income in relation to a dependant is somewhat different to that of a bankrupt (details about the determination of a bankrupt's income are contained in Part 3 below) The Act does not provide a special definition for income in relation to a dependant and it is given to have its ordinary meaning. Unlike for the definition of a bankrupt's income, found at s139K, dependant income is not qualified by any additions or exclusions. It is therefore the case that:
      • any amount that would be income of a bankrupt is also income of a dependant.
      • some amounts that are not included in the bankrupt's income calculation are included when calculating a dependant's income, where those amounts are income according to ordinary concepts.
    12. It is important to note that any person receiving a maximum rate of social security benefit will not be a dependant under the Act because their income will exceed the dependant threshold. However, if the person receives a part rate payment that is below the prescribed amount, they may be a dependant.
    13. Applying the formula to the bankrupt's income

    14. The formula at paragraph 2.1 is applied to the bankrupt's assessed income for each year (or part-year) of their bankruptcy to calculate the amount payable for each CAP.
    15. Where there is a part-year of bankruptcy, the bankrupt's assessed income and the AITA are apportioned for the relevant part of the year.

  3. Determining the bankrupt's assessable income

    1. Section 139L of the Act defines income as having its ordinary meaning and including certain one-off amounts such as termination payments, loans from associated entities and fringe benefits, and excluding payments such as child support.
    2. Section 139M of the Act further expands the definition of income for contributions purposes to include amounts derived by a bankrupt, even if not received by the bankrupt, with section 139K defining derived as:
    3. The Official Trustee therefore assesses the income derived by the bankrupt, which is not necessarily the same as the income received by the bankrupt. It is the income that is derived that is the basis of the calculation outlined in paragraph 2.1 above.
    4. Inclusions to income

    5. Income includes salary and wages and profit from operating a business or profession, as well as the following categories of payments and entitlements:
      1. in most circumstances, fringe benefits and salary sacrifice amounts (also called salary packaging)
      2. non-cash benefits supplied to a bankrupt by someone other than their employer
      3. loans from associated entities (bankrupts may be disclosed as borrowing from companies, trusts or third parties where the underlying nature of these transactions is actually the payment of income)
      4. money received by a company, trust or third party resulting from the work or services of a bankrupt, less any expenses (other than those of a capital nature)
      5. tax refunds that relate to income earned after the date of bankruptcy are included in assessable income pursuant to section 139N (whereas refunds related to income earned before bankruptcy are assets that vest in the Official Trustee and the Full amount of the refund is payable to the trustee)
      6. superannuation payments in excess of the superannuation guarantee rate made by an employer that arise from an industrial agreement solely between the bankrupt and the employer
      7. some allowances that are, in effect, additional income and are not expended on work-related expenses.
      8. drawings from a business
      9. most social security payments made under the Social Security Act 1991 such as the JobSeeker Payment and Disability Support Pension
      10. other income as determined by the Official Trustee
    6. Motor vehicle benefits

    7. With the Bankruptcy Regulations 2021 coming into effect on 1 April 2021, all assessments conducted on or after this date use a set 0.2 rate for calculating the value of a motor vehicle benefit (pursuant to item 3 of Schedule 2 of the Regulations).
    8. Prior to 1 April 2021, Schedule 4 of the Bankruptcy Regulations 1996 provided different rates with reference to the kilometers travelled, where the provider of the benefit was the bankrupt's employer:[2]
      1. Kilometres travelled Rate
         > 40,000  0.06
         25,000 to ≤ 40,000  0.10
         15,000 to < 25,000  0.18
         < 15,000  0.24
    9. Prior to 1 April 2021, where the provider of the benefit was somebody other than the bankrupt's employer, the following rates applied:
      1. Kilometres travelled Rate
         > 40,000  0.07
         25,000 to ≤ 40,000  0.11
         15,000 to < 25,000  0.20
         < 15,000  0.26
    10. Where an assessment for a CAP was done prior to 1 April 2021, and where that same CAP is reassessed on or after that date, the old rates still apply (pursuant to section 116 of the Bankruptcy Regulations 2021).
    11. Subsection 33(5) of the Bankruptcy Regulations provides for the modifications to the Fringe Benefits Tax Assessment Act 1986 as in force on 1 July 1992 in Schedule 2 and subsections 33(3) and 33(4) of the Regulations not applying to motor vehicle benefits where the provider of the benefit is the bankrupt's employer, the benefit is provided in respect of the bankrupt's employment and the bankrupt does not exercise effective control over the employer. That is, the Fringe Benefits Tax Assessment Act 1986 (“FBTAA”) as in force in 1992, but without modifications is applicable in circumstances where the benefit is provided by an arm’s length employer.[3]
    12. Exclusions to income

    13. The following are not income in relation to a bankrupt:
      1. child support and maintenance amounts, if they are received pursuant to the Child Support (Registration and Collection) Act 1988
      2. rent subsidies paid by the Commonwealth or a State or Territory, other than to an employee.
      3. the pay and allowances paid to members of the Naval Reserve, Army Reserve or the Air Force Reserve other than in respect of full-time continuous service.
      4. payments for jury service or witness expenses.
      5. any compulsory superannuation payments made by an employer pursuant to the Superannuation Guarantee Charge Act 1992
      6. an amount paid under the National Disability Insurance Scheme in respect of reasonable and necessary supports, as well as any returns earned, derived or received on these amounts.
      7. certain family assistance and social security payments referenced in section 35 of the Bankruptcy Regulations 2021.
    14. Certain other payments received by a bankrupt may be excluded for income purposes, depending on the nature of those payments.[4] Consideration will need to be given to the legislation under which the payment is made, including whether or not it provides for the payment being income, which is something that the trustee will investigate as part of the assessment process.

      1. (the rate of the superannuation guarantee amount is current as at the date of publication and may have changed. Please verify the current rate at the ATO website.)
    15. Expenses

    16. The Act does not expressly provide for any expenses to be deducted from income; however, the meaning of income referred to in section 139L and case law indicate that certain expenses should be allowed.
    17. Expenses that are allowed as deductions for income tax purposes are not automatically allowed as expenses for contribution assessment purposes (for example, depreciation and other capital expenses are not allowed). Consideration will be given to the nature of the expense, whether the expense was necessarily incurred and whether the expense was incurred directly in relation to the work or services performed by the bankrupt.
    18. If a bankrupt claims self-employed, work-related, expenses and derives the majority of their income from providing personal services, consideration should be given as to whether the bankrupt passes the results test, employment test or business premises test (see the ATO website). If these tests are not passed and, in the absence of the bankrupt providing a personal services business determination from the ATO, the Official Trustee may treat the bankrupt as an employee and any expenses claimed will be scrutinised accordingly.
    19. Determination of income by trustee

    20. Sections 139Y and 139Z of the Act, in conjunction with paragraph 139L(1)(a)(vii), allow the trustee to determine the assessable income of a bankrupt where amounts of money (or the value of any non-monetary consideration) for work or services performed by the bankrupt are paid to another party.
    21. Section 139Y provides that, if a bankrupt is employed or enters into a transaction that would reasonably have produced income and the bankrupt was not paid anything or is paid an amount that is regarded as less than reasonable remuneration, the Official Trustee can issue an assessment based on what would be reasonable remuneration in the circumstances.

    22. Section 139Z of the Act provides that, if a bankrupt fails to provide information about their income or claims not to be in receipt of any income, and the trustee has reasonable grounds to believe the bankrupt is in receipt of income, the trustee can apply this section to issue an assessment based on income determined by the trustee.
    23. Section 139Z may be applied in relatively simple cases where, for instance, a bankrupt whose liability was assessed in a previous CAP (or CAPs) has failed to return a statement of income for the next CAP. In such a case, an assessment may be issued based on previous CAP income with adjustments for an award increase and/or the consumer price index.
    24. The Official Trustee’s ability to determine a bankrupt’s income in the absence of evidence or in a way that is contrary to the bankrupt’s representations is significant. The use of these powers will generally be limited to circumstances where the bankrupt has not cooperated with the Official Trustee’s enquiries. Alternatively, the powers may be used where the Official Trustee has reasonable grounds for believing that the bankrupt has under-reported their true income to the trustee. After the assessment is issued, the Official Trustee will have careful regard to any correspondence and evidence received from the bankrupt in deciding whether to issue a revised assessment. For example, if an uncooperative bankrupt begins to cooperate and provides better particulars of their income, then the Official Trustee will issue a revised assessment based on these better particulars. Refer to paragraph 5.11 below about reassessments.
  4. Other considerations

    1. Foreign income

    2. Assessable income includes income earned or derived overseas.
    3. The Act does not specify how income in foreign currency should be converted. Consistent with a 2011 AAT decision,[5] the approach taken by the Official Trustee is to convert the foreign income at the exchange rate on the date of the assessment.
    4. Depending on the bankrupt's employment and the country where the money is earned, the bankrupt may be required to pay foreign tax rather than Australian income tax. Section 139N does not expressly include foreign income tax; however, the Official Trustee will allow this deduction upon receipt of sufficient evidence of the amount paid.
  5. The income contribution assessment process

    1. The first (CAP1) assessment

    2. In most cases, a CAP1 assessment will be based on the information provided by the bankrupt on their Statement of Affairs/Bankruptcy Form. Where further information is required to complete the assessment, the trustee will request this from the bankrupt.
    3. In the case of a Sequestration Order (bankruptcy) where no Statement of Affairs/Bankruptcy Form has been filed within a month of the date of bankruptcy, the trustee may determine the bankrupt's income pursuant to section 139Z of the Act and issue an assessment based on the best information available at the time.
    4. When an assessment has been completed, the Official Trustee must issue a Notice of Assessment outlining the bankrupt's liability.
    5. A reassessment can be carried out at any stage if there are changes in any of the bankrupt's circumstances, that affects their liability.
    6. Subsequent assessments

    7. Section 139W of the Act places a duty onto the trustee to conduct an assessment, as soon as practicable, after the start of each assessment period. On completion of the assessment, the trustee must provide a notice of the outcome to the bankrupt, in accordance with s139W(4).
    8. Section 139U of the Act requires a bankrupt, as soon as practicable and in any event not later than 21 days after the end of a CAP, to give to the trustee a statement outlining their income for that CAP and expected income for the next CAP.
    9. While the Bankruptcy Act doesn't require the bankrupt to provide evidence of their income in a particular format, the Official Trustee may issue a Statement of Income to the bankrupt for completion. The statement of income is a form designed to capture all the information the bankrupt needs to provide to therefore make the process faster.
    10. The trustee can use the information provided by the bankrupt to facilitate both the assessment for the next CAP and a review of the assessment of the CAP about to expire (refer to the information below about reassessments).
    11. If a bankrupt fails to return their completed Statement of Income or provide evidence of their income in another form within 21 days after the end of the CAP, or if a bankrupt fails to notify the Official Trustee of changes to their income, or the number of dependants and a liability, or an increased liability, results, an objection to discharge will be lodged by the Official Trustee. More information about objections is contained below.
    12. In certain circumstances, a referral will also be made to AFSA's Enforcement Unit, as the failure to supply a statement of income may constitute an offence. Note that the penalty, upon conviction, for failure to provide income information as required by section 139U of the Bankruptcy Act is imprisonment for 6 months and all trustees are obliged to report an offence.

    13. Reassessments

    14. Reassessments of contribution liabilities may be conducted at the trustee's initiative or where the trustee is satisfied that there is a reasonable ground(s) for a reassessment.
    15. Reassessments may be issued at any time, pursuant to section 139WA of the Act.
    16. A reassessment for a previous CAP is calculated based on the current AITA on the day of the assessment and not the AITA that applied at the time of the original assessment.
    17. Nil assessments

    18. Where the Official Trustee assesses a bankrupt as not having a liability to make contributions, a record of that decision will be retained, and the bankrupt will be advised in writing. This assessment outcome is referred to as a nil assessment. If information or documents other than the Statement of Affairs/Bankruptcy Form or Statement of Income are used to reach the decision to issue a nil assessment, that material will be identified in the record of the decision.
    19. Assessment notices

    20. The trustee will issue an assessment notice in all cases where an assessment or reassessment has been completed and the bankrupt has a liability.
    21. The assessment notice will include sufficient detail to show how the liability was calculated and the payment schedule. The notice will also explain the bankrupt’s review rights and the process they can take if they are experiencing hardship.
    22. Payment schedules

    23. The assessment notice will include a payment schedule.
    24. The Official Trustee aims to collect each CAP liability in full by the end of the CAP and before instalments for the following CAP commence. In the bankrupt's final CAP, the Official Trustee aims to collect the liability before the bankrupt is discharged. Payment schedules that run beyond the current CAP will be avoided, where possible.
    25. The Official Trustee will prepare a payment schedule that will usually include instalments of no less than $100. Generally, the instalments will not be more than 20 per cent of the bankrupt's assessed net income, unless the bankrupt is a high-income earner in which case a higher instalment rate may be applied. The Official Trustee aims to set the highest, affordable, payment schedule to ensure a liability is contained within a CAP.
    26. In the first instance, the payment schedule will align with the dates on which the bankrupt receives their income to ensure prompt payments; however, the Official Trustee may consider alternative payment schedules if it makes it easier for the bankrupt to make payments. This approach encourages compliance.
    27. The Official Trustee will consider varying the payment schedule if the bankrupt's circumstances change, unexpectedly.
    28. Bankrupts who fail to pay the liability before the end of a CAP may then be required to pay two (or more) CAP liabilities in the following year, which may mean paying more per instalment than they would have had to pay over each separate CAP.
    29. Sometimes a bankrupt may pay more than they are liable to pay for a particular CAP. This can occur for several reasons, for example, the bankrupt over-estimated the income they would earn at the start of the CAP. For CAPs one and two, the excess contribution will be applied to the subsequent CAPs, e.g., two and three. If the bankrupt overpays in the last CAP, they are not entitled to a refund (i.e., overpayment in the third CAP will not permit a refund of the overpaid amount). In exceptional circumstances the Official Trustee may exercise discretion to make an allowance back to the bankrupt for the overpayment. This will generally be limited to occasions when the overpayment is caused by an error of the Official Trustee.
    30. Hardship applications

    31. There are specific hardship provisions in section 139T of the Act that provide for the reduction in a contribution liability for a bankrupt who has experienced, or will experience, financial hardship in paying their contribution liability.
    32. The list of what constitutes hardship for the purposes of the Act is specific and the Official Trustee does not have discretion to grant a hardship application for expenses that are not listed in the Act. The exceptional circumstances that may be considered in relation to assessing whether a bankrupt will face undue hardship are:
      • ongoing medical expenses incurred by the bankrupt for himself or herself or a dependant (with what constitutes a "dependant" defined in the Bankruptcy Act).
      • childcare costs essential for the bankrupt to work.
      • particularly high rent for non-public housing when there are no alternatives available.
      • substantial expenses incurred when travelling to and from work.
      • the loss of financial contribution by someone who lives with the bankrupt (usually the bankrupt's partner or spouse) and contributes to household costs.
      • any other reason specified in the Bankruptcy Regulations (although there are presently no reasons specified).
    33. The granting of a hardship application is not automatic. The trustee will need to be satisfied, based on evidence supplied by the bankrupt, that at least one of the hardship grounds exists and that the bankrupt will suffer genuine hardship if they are required to pay the assessed income contribution liability. The decision of the official trustee may be appealed in the first case to the Inspector-General in Bankruptcy.

    34. The Official Trustee has a recommended Hardship Application Form available for use by bankrupts. This form is neither a prescribed form nor an approved form and bankrupts are not obligated to use it. The trustee must accept any hardship application so long as it is in writing (a requirement of the Act) however, bankrupts are encouraged to use the form as it guides them on the supporting documents required and has been designed to capture the information the trustee requires to make a decision, which will speed up the decision process.
  6. Collection and enforcement

    1. Investigations

    2. The ability of the Official Trustee to issue valid enforceable assessments is not affected by a bankrupt's failure to cooperate and provide information, nor does the Official Trustee have to carry out investigations which can be expensive and time-consuming before issuing an assessment. Investigations to determine a bankrupt's income and contribution liability will only be carried out where it is expected to result in a cost­ effective return to the estate and, if creditors have been requested to provide funding to contribute to the investigation and those creditors have been forthcoming with that funding. The Official Trustee will only raise a contribution liability if it has reasonable grounds for believing that the bankrupt is earning above the AITA. The Official Trustee will have careful regard to any material provided by the bankrupt as a result of subsequent cooperation.
    3. Collecting an outstanding liability after discharge

    4. Section 139R of the Bankruptcy Act provides that a contribution liability survives discharge from bankruptcy. This means that the trustee can continue to collect payments from a person, after their bankruptcy has ended, and take action to have the debt enforced like any other debt.
    5. In addition, section 39 of the Bankruptcy Regulations specifically requires a discharged bankrupt who was a contributor immediately before discharge and who has an outstanding liability to notify the trustee of changes to the information on their Statement of Affairs and contact details.
    6. Recovering arrears

    7. Arrears occur when a bankrupt has not made payments towards an outstanding contribution liability in accordance with the most recent payment schedule set by the Official Trustee.
    8. The Official Trustee aims to be a model trustee and, when collecting arrears, will comply with the minimum standards set out in the joint ACCC and ASIC publication Debt collection guideline: for collectors and creditors. This guideline provides practical guidance to creditors, including government agencies, on how the Commonwealth consumer protection laws apply to debt collection. For example, it refers to when and how many times a collector may telephone a debtor.
    9. If a bankrupt falls into arrears with payments, the Official Trustee will contact the bankrupt via telephone, email, or post.
    10. If the bankrupt fails to rectify the arrears or negotiate a new payment schedule after being contacted by the trustee, an overdue payment of contribution notice (letter) will be sent via email or post.
    11. The arrears letter advises the bankrupt that they must attend to payment of the arrears or contact the trustee to come to a suitable arrangement for payment. The letter provides a date that the payment must be received by. The letter also advises that, if the bankrupt does not comply, the trustee may lodge an objection to discharge and may make an application to the Official Receiver for the issue of a section 139ZL notice to garnishee the bankrupt's wages. (More information about garnishee notices and objections is contained below.)
    12. The trustee will reassess the situation after sending the arrears letter and, if the bankrupt's payments are not up-to-date or a suitable payment arrangement has not been negotiated, the trustee may proceed with the objection and garnishee notice without further recourse to the bankrupt. When assessing a proposed payment arrangement, the Official Trustee may invite the bankrupt to complete a budget planner. The budget planner captures the bankrupt’s income and expenses on, for example, a fortnightly basis. The use of the budget planner is voluntary for bankrupts, however, it will assist the Official Trustee to negotiate a payment arrangement.
    13. There are occasions where the bankrupt loses their employment but remains liable to pay contributions. This might occur when the bankrupt is in arrears or has received a payment as a result of the termination of their employment. The Official Trustee will act reasonably in these circumstances, in recognition that the termination pay is designed to assist the bankrupt during a period of unemployment. An interim payment arrangement may be negotiated involving a partial payment of the termination pay followed by a temporary suspension of payments until such time as the bankrupt finds employment.
    14. Other avenues available to the trustee for collection of arrears include:
      • applying to Court to obtain a judgment, or
      • making the debtor bankrupt again by sequestration order, or
      • using the services of a debt collection agent, or
      • requesting that the Official Receiver issue a garnishee notice to the ATO, which will result in any refunds that would otherwise have been due to the bankrupt being paid to the trustee, or
      • making use of the Act's supervised account regime (which requires the bankrupt to open a bank account and pay in all cash income).
    15. Objections to discharge from bankruptcy

    16. Where an objection is lodged with AFSA on or before the due date for discharge, the period of bankruptcy will be extended to either 5 or 8 years from either the date the debtor’s petition was accepted (debtor’s petitions) or when the bankrupt filed a statement of affairs which was accepted (sequestration orders). The period of bankruptcy will depend on which ground(s) of objection the objection is based.
    17. Grounds of objection contained in section 149D that relate to income contributions include where the bankrupt has provided misleading information, has failed to provide information about their income or has failed to pay income contributions.
    18. Although objections can be lodged at any stage before discharge, they will generally be lodged promptly after the bankrupt has failed to return a Statement of Income, provide other information about income within 21 days after the end of a CAP or where the bankrupt has failed to rectify arrears following contact from the Official Trustee.
    19. The Official Trustee will generally only advise the bankrupt once, in writing, that an objection may be lodged before proceeding to lodge the objection.
    20. An objection will be considered during the third CAP where the bankrupt has a history of arrears, and it is considered likely that the contribution liability will not be paid within three months after the third anniversary of the bankruptcy.
    21. If an objection is in place after the third anniversary of the bankruptcy, the Official Trustee will continue to issue and collect assessments for CAP4 and beyond.
    22. More information about objections can be found in Objections to discharge from bankruptcy.
    23. Garnishee notices

    24. Section 139ZL of the Act allows the Official Trustee to request that the Official Receiver issue a notice to a third party for the recovery of income contributions payable by a bankrupt. A common example is the issuance of a notice to a bankrupt's employer, in which the employer is required to pay a certain amount to the trustee each pay period.
    25. In accordance with the requirements outlined in Official Receiver Notices, the Official Trustee will not consider a section 139ZL notice unless the bankrupt:
      • has been notified of their liability to pay income contributions, and
      • is in arrears with their payments with reference to the most recent payment schedule sent, and
      • has been given an opportunity to negotiate a payment arrangement and has failed to do so or having made such an arrangement, has failed to comply.
    26. Supervised account regime

    27. Where the bankrupt has failed to pay contributions and a section 139ZL notice has been ineffective, the Official Trustee will consider using the supervised account regime (SAR).
    28. A determination that the SAR applies to a bankrupt will not be made unless, at the time of making the determination, the bankrupt is liable to pay an income contribution and either:
      • where the contribution is payable by instalments, the bankrupt has not paid the whole of an instalment when it became payable, or
      • where the contribution is payable at a specified time, the bankrupt has not paid the whole of the contribution at that time.
    29. The SAR is generally applied in a small number of cases, typically where the bankrupt is self-employed and has failed to meet their obligations voluntarily and other collection methods have been or are likely to be unsuccessful.
    30. The Official Trustee will negotiate an arrangement with the bankrupt allowing regular withdrawals from the account to meet the bankrupt's living expenses while, at the same time, ensuring that the balance of the account remains sufficient to meet the bankrupt's liability to pay contributions. Generally, it is intended that the Official Trustee will consent to regular or periodic withdrawals from the account and that the Official Trustee will not consent to the bankrupt withdrawing amounts that will result in there being insufficient money remaining in the account to meet the contribution liability. In addition to this ongoing consent to meet living expenses, the Official Trustee may also consent to additional withdrawals to meet unexpected liabilities or where a balance has accumulated in the account that exceeds the amount required to meet the bankrupt's contribution liability.
    31. When a determination is in place, the bankrupt is prohibited from entering into non­ monetary or constructive receipt arrangements and must obtain the trustee's consent in order to continue with such arrangements where the effect is that income derived by the bankrupt is not actually received by the bankrupt.
    32. A determination will cease to be in force where the bankruptcy is annulled or where the bankrupt is discharged and there is no further liability to pay income contributions. Where the bankrupt is discharged from bankruptcy and has an outstanding contributions liability, the determination will cease to be in force only when the bankrupt is no longer liable to pay income contributions.
    33. Non-compliance with the requirements under the SAR regime is an offence punishable by imprisonments for six months. Any instances of non-compliance will be referred to AFSA's Enforcement Unit.
    34. All decisions made by the Official Trustee under the provisions relating to the SAR are reviewable by the Inspector-General and the AAT.
    35. Death of a bankrupt

    36. Section 38 of the Bankruptcy Regulations addresses the treatment of a contribution liability in the situation where a bankrupt dies. It prohibits refunds for amounts already paid by the bankrupt and makes the bankrupt's deceased estate liable for any balance owing up-to the date of death, after apportioning the liability for the CAP into pre-death and post-death periods.
  7. Rights of review

    1. The Official Trustee will explain the bankrupt's rights and the process for requesting a review in correspondence accompanying the notice of assessment.
    2. Bankrupts are encouraged to take up any concerns or queries they may have with their case manager or the case manager's supervisor in the first instance before making a formal application for review, however this is not a mandatory requirement.
    3. An assessment may be reviewed by the Inspector-General, either on the Inspector­ General's initiative or at the request of a bankrupt. Decisions regarding hardship applications may also be reviewed by the Inspector-General, either on the Inspector­ General's initiative or at the request of a bankrupt.
    4. Decisions made by the Inspector-General are also reviewable by the Administrative Appeals Tribunal.
    5. An application for review of an assessment or hardship decision by a bankrupt must be in writing and addressed to the Inspector-General. The application must be made within 60 days of receiving the notice. More information about reviews of decisions can be found on AFSA's website.
    6. When making a decision, the Inspector-General has all the powers of the Official Trustee and may confirm the Official Trustee's decision or issue a reassessment.
    7. If an application for review has been made and the Inspector-General agrees the assessment should be reduced, the Inspector-General will issue a reassessment reflecting this reduction, which may result in the review request coming to an end.
  8. Note on indexed amounts and Superannuation

    1. The Indexed amounts for the BITA and AITA, and the Superannuation Guarantee Amount were both current as at the date of this publication. The amounts may have subsequently changed, and so should be verified when an assessment is issued. The indexed amounts can be verified on this page at the AFSA Website. The Superannuation Guarantee Amount can be verified at the this ATO webpage.


[1] Some industry associations or other legislation may place restrictions on bankrupts, but these are independent of the Bankruptcy Act and the Official Trustee

[2] The rates applied when conducting an income contributions assessment even though they were removed from the FBTA Act in 2011 when the rate for calculating FBT liability was set at 0.20, regardless of the number of kilometres travelled

[3] This section is currently under revision and our guidance on this topic may change

[4] Some payments received may be assets of the bankrupt estate, with the full amount needing to be forwarded to the trustee.

[5] Sheikholeslami and Inspector-General in Bankruptcy [2011] AATA 670 (28 September 2011)

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