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Cashed up Ruddock makes his presence felt

Cashed up Ruddock makes his presence felt

The Attorney-General Philip Ruddock and his department have been the recipient of very generous budget allocations, marking a new era of high visibility for the nation’s top legal officerThe…

The Attorney-General Philip Ruddock and his department have been the recipient of very generous budget allocations, marking a new era of high visibility for the nations top legal officer

The A-G’s and Justice and Customs Minister’s portfolios will share in $1.621 billion in additional funding over five years to finance a raft of initiatives. In the post-September 11 world, this triumvirate is set to grow in vote-winning status and continue to be the beneficiary of preferential fiscal treatment.

Such is the expanded brief of Ruddock, that one of the first orders of business is a refurbishment of his digs to handle the extra workload. An initial $6.2 million in 2004-05 and then $23 million over three years will be provided for fitout costs for the relocation of the Attorney-General’s Departmental offices in recognition of the increasing demand on the Department to provide advice to government on existing and emerging issues.

Additional funding of $34.2 million will be provided over four years for the appointment of a further eight magistrates to the Federal Magistrates Court to improve migration litigation processes.

A $52.7 million boost will be provided over four years for Legal Aid including program administration funding to ensure legal representation is available to Australians in need (see page 1 of this issue for a response to this announcement by the ACT Chief Minister Jon Stanhope and Democrats spokesperson on the A-G and Justice, Senator Brian Greig).

However, the biggest announcement out of Ruddock’s office is his headline grabbing exposure draft of legislation targeting high income earners who use bankruptcy to avoid paying debts they can afford to pay.

“Under these changes, the trustee in bankruptcy will be able to recover assets held in the name of the bankrupt’s spouse, or that of another party, where the bankrupt has paid for and uses the asset,” Ruddock said.

These changes will mean that high income earners who become bankrupt won’t be able to rely on financial arrangements designed to shield assets from creditors.

Other changes included clarifying the rights of the parties when family law and bankruptcy issues need to be resolved and giving the bankruptcy trustee stronger powers to collect income contributions during bankruptcy.

The bankruptcy trustee is also given enhanced powers to apply to set aside transfers of property under family law financial agreements where those transfers put that property beyond the reach of creditors.

The Attorney-General said these changes were based on the recommendations of the joint taskforce report, TheUse of Bankruptcy and Family Law to Avoid Payment of Tax — an inter-agency report proposing changes to bankruptcy, family and tax laws to crack down on high-income tax avoiders.

The Government was keen to ensure there was an opportunity for parliamentary and public scrutiny of the reform proposals, and had referred the draft legislation to the House of Representatives Standing Committee on Legal and Constitutional Affairs.

In announcing the Bill, Ruddock said: “I recognise these amendments represent a fundamental shift in bankruptcy policy. Many people will be affected by the changes. I also understand that some will feel aggrieved that numerous asset protection arrangements which are currently seen as legitimate will no longer be effective.

“The Government is open to reasonable and rational suggestions about how the reforms could be improved. But I want to make it clear that there are certain arguments we have already considered and do not accept.

“Some people hold the view that these asset protection strategies are a legitimate way of insuring against professional negligence or misconduct actions. It is the role of professional indemnity insurance — not the bankruptcy system — to deal with these sorts of risks.

“It has also been argued that the proposed amendments will stifle innovation and risk taking and that this will ultimately discourage people from working in ‘risky’ professions.

“Once again, this is flawed logic. Transferring risk to creditors cannot be justified when a bankrupt still has access to substantial wealth simply because of the way they have structured their affairs.

“In any case — the bankruptcy system already encourages innovation in many ways: it provides automatic discharge from unmanageable debt; it protects property used for earning an income; it protects essential personal property and superannuation interests; it allows bankrupts to continue trading — even if some restrictions are imposed.”

The exposure draft bill (and a readers guide) is available from www.itsa.gov.au and www.ag.gov.au.

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