Senator Wright asks questions of the Australian Financial Security Authority, relating to the introduction of a $120 fee for the lodgement of a debtor's petition, during an Estimates hearing for the Legal and Constitutional Affairs Legislation Committee.
Senator WRIGHT: I want to ask some questions about the proposal announced on 6 February to introduce a fee of $120, which is to be effective from 1 April, for the lodgement of a debtor's petition under the Bankruptcy Act 1966. First of all, what analysis did your agency or the Attorney-General's Department perform in order to examine the impact on people who are likely to be affected by the introduction of this new fee?
Ms Ingram: I can tell you that the new fee was a decision made as part of the budget process and is to help put AFSA on a fully cost recovered basis. It also addresses the anomaly that we are one of the only major common law jurisdictions, if not the only one, that does not charge a fee for applications for bankruptcy.
Senator WRIGHT: Has there been any analysis done on the possible implications or consequences of that? Has AFSA done that? Then I will ask whether the AGD has.
Ms Ingram: Our understanding, based on what has happened when fees were introduced within other jurisdictions, is that there was no direct impact on the number of bankruptcy administrations. But we have not done modelling of what it would mean for Australia. I am not sure if the department has done any.
Senator WRIGHT: Have the Attorney-General's Department done any modelling along those lines?
Mr Minogue: No, the department has not done any modelling. As Ms Ingram says, this was a decision of government announced in MYEFO, and work has been done on implementing that decision.
Senator WRIGHT: Thank you. I do understand that the announcement was made in the context of MYEFO with the intention of full cost recovery. As you say, this occurs in other Commonwealth countries-certainly in Britain. It has been shown to be an impediment to some people being able to proceed to bankruptcy, and they may have to wait until a creditor proceeds, or they may need to enter into other more inappropriate insolvency agreements. The key question that has been put to me by people who are very concerned in the community is: who will pay this fee? We know from your recent analysis of debtors' profiles that unemployment or loss of income is the most frequent primary cause of insolvency? Do you have any idea about who will pay?
Ms Ingram: Your reference to the UK is important. I am not aware of that report or any analysis. The fee in the UK is nearly $1,000. Here in Australia we are talking about a $120 fee. So you really cannot make any comparisons.
Senator WRIGHT: I am talking about concern that has been raised generally. My understanding is that the majority of people who seek bankruptcy earn less than $30,000 in the year before they enter bankruptcy-so they are obviously lower income people-and on the basis of your agency's most recent analysis of debtors' profiles, I think, the most frequent primary cause of insolvency for non-business related bankruptcy is unemployment or loss of income. Although $120 may not sound very much, obviously if they are at the point where they are seeking bankruptcy, it may be difficult. Who is going to pay for that if they have not already got the money to be able to manage their debts? In Britain, I understand, it is charities. Alternatives might be putting it on the credit card-if they have not breached their credit card limit-or payday lenders. Where are they going to get the money from? Isn't the consequence that responsibility ends up being put on other bodies anyway, whether they are federally funded-in the form of charities in Australia-banks or payday lenders? Who is going to pay?
Ms Ingram: Bankruptcy is a service to the public, and it is a discretionary service. If you think about it, either it is the taxpayer who pays-and then it falls on those who have managed their affairs accordingly-or it is creditors who miss out.
Senator WRIGHT: Essentially, it is shifting the costs, isn't it? One of the questions that has been put to me is that, in some cases, it will entail shifting the costs to other federally funded agencies, financial counsellors perhaps or charities or, in some cases, it will entail shifting the costs to creditors' banks or payday lenders.
Ms Ingram: I do not think you can necessarily assume that. As you are aware, there is now a fee on requests to travel overseas. About 5,000 or 6,000 bankrupts managed to have someone fund their overseas travel.
Senator WRIGHT: There is a great potential for the fee to act as a disincentive to those who are considering insolvency. In some cases they may not be able to find that money to go ahead with it. Has that been considered as either a risk or a benefit in relation to its introduction?
Ms Ingram: I think you are making an assumption there. As I said, in other jurisdictions where it has been introduced we have not, and the levels are much higher in other jurisdictions. We are not aware that it has acted as a deterrent.
Senator WRIGHT: Is there no evidence that it has caused people to be stranded where they are not able to proceed with bank bankruptcy? Is there no evidence that that occurs?
Ms Ingram: Not that we are aware of. I cannot say that there is no evidence, but we are not aware of that.
Senator WRIGHT: What have you done to make yourselves aware? I am just interested. It seems surprising to me that there would be no evidence that, in any cases, that would not be a disincentive. What have you done to acquaint yourselves with the evidence? You said there was no modelling done. I understand that the announcement was made. What research has been done by AFSA that you could rely on in that case?
Ms Ingram: I think I have already answered that question.
Senator WRIGHT: I am sorry; I am confused then. I did not understand. So you haven't done any? So where are you getting that assertion?
Ms Ingram: We haven't done modelling, no.
Senator WRIGHT: So that is what I am asking you: on what basis do you say that there is no evidence? Has AFSA looked into it? Do you have a research officer?
Ms Ingram: We are members of the International Association of Insolvency Regulators. We ask them to give us information about the level of their fees, whether they have fees and the level et cetera. It is a difficult question, because some of those fees have been around for a very long time. To extrapolate from that would be very difficult, All I can say is that we are unaware of any evidence that would say that it would impact on people who would not be able to somehow go bankrupt.
Senator WRIGHT: Has any schedule or criteria been established in relation to reviewing or amending the fee in the future? Has there been any looking forward to assess the effects of it in Australia? Because it is a new fee here.
Ms Ingram: I am not sure if you are aware but we as an agency have to go through what you call a cost-recovery impact process, which is run with the department and the Department of Finance. That occurs every two years, and so all our fees are reviewed every two years. They reflect the cost to us of giving that service.
Senator WRIGHT: I understand that is one perspective to take, which is whether or not you are getting the full cost recovery that is apparently now required, but I am actually asking: will there be any review about the impact of the number of insolvencies, for instance, in the future? Will there be any mechanism by which you will assess whether this is in fact acting as a deterrent or a disincentive for people to seek bankruptcy, and the consequences for some people of that?
Ms Ingram: That would be a policy matter for the government to determine, and it would really be anecdotal evidence and we would hear it through consulting with financial counsellors and others.
Senator WRIGHT: So the answer is that, in terms of the agency-which is what I am asking you about-you do not have any proposals to be monitoring?
Ms Ingram: You would not be able to. For instance, if bankruptcy numbers declined, you could not attribute it necessarily to the imposition of the fee; it could be more likely to be economic circumstances. So it would be a very difficult thing, which is why the evidence that you are looking for is not easy to obtain.
Senator WRIGHT: I am sorry I am not terribly familiar with your agency.
Ms Ingram: But it is something that we would obviously be interested in knowing and, if we heard that that was the case, we would let the department and the Attorney know that it had a severe impact.
Senator WRIGHT: So you have not previously engaged in any proactive kind of monitoring or research on the basis of the work that you do? That is not part of the scope of what you do?
Ms Ingram: The fee has not come into effect yet.
Senator WRIGHT: No, I am asking about previously, just about trends in bankruptcies? Do you ever engage in that kind of-I am not sure-forward thinking or planning or-
Ms Ingram: As I said to the senator earlier, we have been trying to enhance our statistic gathering. We are not given the mandate to do in-depth analysis in relation to statistics. We are a statistic provider; we do not do the analysis.
Senator WRIGHT: That is what I am genuinely asking. I am interested-no qualitative research in that way, is that right?
Ms Ingram: No.