Submission: Personal Insolvency Consultation – Minimal Asset Procedure

30/07/2024

On 8 July 2024, Attorney-General the Hon Mark Dreyfus KC MP announced consultation on the introduction of a Minimal Asset Procedure (MAP) in Australia which ‘would clear a person’s debts and allow access to a fresh start sooner than a bankruptcy, where that person has no other way to pay. Importantly, it should also leave creditors no worse off – meaning Australia’s personal insolvency system remains fair and balanced.’

ARITA's submission supports the introduction of a MAP in Australia, subject to the recommendations set out in our response to the consultation discussion questions to improve its operation and balance the interests of debtors and creditors, including, but not limited to, the following: 

  • The MAP must include a mandatory education component.
  • The MAP should not be available to debtors who own (or partly own) a home, land or buildings, regardless of the amount of equity (or lack thereof) in the property.
  • Given the well-established basis of the base income threshold amount in bankruptcy, the same basis should be used to determine the maximum income for accessing the MAP and a person’s ability to repay their debts.
  • Individuals employing people who have employee entitlements outstanding, including superannuation guarantee amounts, and individuals who have previously been bankrupt or subject to another personal insolvency procedure, should not be eligible for the MAP.

ARITA also submits that specific anti-avoidance and penalty provisions must be incorporated into the MAP to maintain confidence in the personal insolvency system and balance the interests of debtors and creditors and safeguard it from abuse, including, but not limited to, the following:

  • Before accessing the MAP (or any personal insolvency mechanism) the debtor must be provided with a summary sheet outlining personal insolvency options, so they are fully informed of their alternatives. A copy of the summary sheet should be signed by the debtor and provided to AFSA acknowledging that they have read the information.
  • A debtor must declare that they are not aware of any voidable transactions or misconduct that may otherwise disqualify them from accessing the MAP, and that a false declaration is a strict liability offence which also triggers the conversion of the MAP to traditional bankruptcy.
  • A debtor be subject to restrictions and obligations regarding honest disclosure, cooperation, credit disclosure and business operations, including a prohibition on being a director at the time of entering the MAP or acting as a director or being involved in the management of a company for the period of the MAP. 
  • In addition to the proposed safeguards set out in the Discussion Paper, further safeguards be applied which trigger the automatic transition to a traditional bankruptcy.

Our submission also reiterates that ARITA continues to advocate for all providers of insolvency/solvency advice to be licensed and subject to the same legal duties as insolvency practitioners or lawyers. We believe that such a reform will reduce the prevalence and harm caused by dodgy pre-insolvency and phoenix advisors.

ARITA maintains that all offences under the Corporations Act 2001 (Cth) and the Bankruptcy Act 1966 (Cth), including any new legislation regarding a MAP, should include an offence to advise, instruct, assist or counsel any person to commit or attempt those offences.

Read ARITA's submission.

Attorney-General's Department Consultation: Personal Insolvency Consultation – Minimal Asset Procedure.