BANKRUPTCY ACT 1966
Subject to this Act, the trustee must, before applying the proceeds of the property of the bankrupt in making any other payments, apply those proceeds in the following order:
(a) first, in the order prescribed by the regulations, in payment of the taxed costs of the petitioning creditor and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee and the costs of any audit carried out under section 175;
(b) second, if the bankrupt had signed an authority under section 188 before the date of the bankruptcy, in payment of:
(i) the remuneration of the controlling trustee (as defined in section 187); and
(ii) the costs, charges and expenses properly and reasonably incurred by the controlling trustee while the authority was in force (including any debts incurred by the controlling trustee that are provable in the bankruptcy);
(c) third, in the case of a bankruptcy that occurs within 2 months after a personal insolvency agreement executed by the bankrupt, or a composition or scheme of arrangement accepted by the bankrupt's creditors, has (including at a time before the commencement of this paragraph) been set aside or terminated, in payment of liabilities, commitments, expenses or remuneration referred to in section 114;
(d) fourth, in the case of the estate of a deceased debtor whose estate is being administered under Part XI, in payment of proper funeral and testamentary expenses;
(e) fifth, in payment of amounts (including amounts payable by way of allowance or reimbursement under a contract of employment or under an industrial instrument, but not including amounts in respect of long service leave, extended leave, annual leave, recreation leave or sick leave), not exceeding in the case of any one employee $1,500 or such greater amount as is prescribed by the regulations for the purposes of this paragraph, due to or in respect of any employee of the bankrupt, whether remunerated by salary, wages, commission or otherwise, in respect of services rendered to or for the bankrupt before the date of the bankruptcy;
(f) sixth, in payment of all amounts due in respect of compensation payable under any law of the Commonwealth or of a State or Territory relating to workers compensation, being compensation the liability for which accrued before the date of the bankruptcy;
(g) seventh, in payment of all amounts due to or in respect of any employee of the bankrupt, whether remunerated by salary, wages, commission or otherwise, in respect of long service leave, extended leave, annual leave, recreation leave or sick leave in respect of a period before the date of the bankruptcy;
(h) eighth, in payment of any sum payable under section 113;
(j) ninth, in payment of:
(i) such preferences, priorities or advantages in favour of any creditor or group of creditors as regards any other creditor or group of creditors; and
as a meeting of the creditors, by special resolution, resolves.
(ii) such costs, charges and expenses incurred in the interests of creditors before the date of the bankruptcy;
[ CCH Note: S 109(1) will be amended by No 11 of 2016, s 3 and Sch 1 item 37, by substituting "section 70-15 or 70-20 of Schedule 2" for "section 175" in para (a), applicable in relation to the administration of regulated debtors' estates on and after 1 September 2017.]
Subsection (1) has effect subject to:
(a) section 50 of the Child Support (Registration and Collection) Act 1988; and
(b) former subsections 221YHJ(3), (4) and (5) and 221YHZD(3), (4) and (5) and former section 221YU of the Income Tax Assessment Act 1936.
The provisions of the Income Tax Assessment Act 1936 referred to do not apply to liabilities arising after 30 June 1993.
The reference in paragraph (1)(e) to amounts due in respect of an employee of the bankrupt includes a reference to amounts due as contributions to a fund for the purposes of making provision for, or obtaining, superannuation benefits for the employee, or for dependants of the employee.
The reference in paragraph (1)(e) to amounts due to or in respect of any employee of the bankrupt also includes a reference to amounts due as superannuation guarantee charge (within the meaning of the Superannuation Guarantee (Administration) Act 1992), or general interest charge in respect of non-payment of the superannuation guarantee charge. 109(2)
Subject to subsection (3), where a payment has been made by the bankrupt of an amount referred to in paragraph (1)(e) or (g) and the payment was made out of moneys advanced by a person for the purpose of enabling the payment, or such a payment, to be made, the person by whom the moneys were advanced has the same right of priority in respect of the moneys so advanced as the person who received the payment would have had if the payment had not been made.
The right of priority conferred by subsection (2) in respect of moneys advanced for the purpose referred to in that subsection does not extend to so much of the money so advanced as exceeds the amount by which the amount in respect of which the person who received the payment would have been entitled to priority has been diminished by reason of the payment.
(Omitted by No 119 of 1987, s 41(1).) 109(5)
Paragraph (1)(f) does not apply to the extent to which the bankrupt is indemnified under a contract of insurance against the liability referred to in that paragraph.
Where, under a law of the Commonwealth or of a State or Territory that provides for workers compensation, a bankrupt is liable to make a payment to a body or fund by way of reimbursing the body or fund in respect of compensation paid or payable by the body or out of the fund under that law, paragraph (1)(f) does not apply to the amount so payable by the bankrupt.
Where compensation payable under a law relating to workers compensation is payable by way of periodical payments, the amount of that compensation shall, for the purposes of paragraph (1)(f), be taken to be the lump sum for which those periodical payments could, if redeemable, be redeemed under the law under which those periodical payments are made.
A special resolution shall not be deemed to have been duly passed for the purposes of paragraph (1)(j) unless the notice convening the meeting at which it was passed contained a copy of the proposed resolution.
[ CCH Note: S 109(7) will be repealed by No 11 of 2016, s 3 and Sch 1 item 38, applicable in relation to the administration of regulated debtors' estates on and after 1 September 2017.]
The trustee must keep the minutes of the meeting, and a written record of the terms of a special resolution, referred to in paragraph (1)(j).
[ CCH Note: S 109(7A) will be repealed by No 11 of 2016, s 3 and Sch 1 item 38, applicable in relation to the administration of regulated debtors' estates on and after 1 September 2017.]
The trustee must allow a creditor or an authorised employee to inspect the minutes and record at any reasonable time.
[ CCH Note: S 109(7B) will be repealed by No 11 of 2016, s 3 and Sch 1 item 38, applicable in relation to the administration of regulated debtors' estates on and after 1 September 2017.]
A payment must not be made under paragraph (1)(j) until 28 days after the day on which the special resolution referred to in that paragraph was passed.
The bankrupt or a creditor may, before the expiration of the period referred to in subsection (8), apply to the Court to reverse or vary the decision of the creditors and the Court may, upon the application, make such order as it thinks proper.
Where in any bankruptcy:
(a) property has been recovered, realized or preserved under an indemnity for costs of litigation given by a creditor or creditors; or
(b) expenses in relation to which a creditor has, or creditors have, indemnified a trustee have been recovered;
the Court may, upon the application of the trustee or a creditor, make such orders as it thinks just and equitable with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving the indemnifying creditor or creditors, as the case may be, an advantage over others in consideration of the risk assumed by creditor or creditors.
Except as provided in paragraph (1)(a), the debts in each of the classes specified in subsection (1) rank equally between themselves and shall be paid in full unless the proceeds of the property of the bankrupt are insufficient to meet them, in which case they shall be paid proportionately.
In subsection (11), debts includes liabilities, remuneration, commitments and expenses specified in subsection (1).