Every year the Insolvency and Trustee Service of Australia (I.T.S.A.) acts as the trustee of approximately 20,000 new bankrupt estates. A great many of these have insufficient assets to meet the costs of administration.
Additionally I.T.S.A. performs a regulatory role for bankruptcy professionals, including debt administrators, and also maintains the National Personal Insolvency Index (N.P.I.). All of this activity costs money.
To offset some of the costs the Bankruptcy Act requires trustees in bankruptcy and debt administrators to remit a certain percentage of all bankruptcy realisations during the year to I.T.S.A. This is known as the “Asset Realisation Charge” or A.R.C. For the financial year ended 30 June 2011, 4.0% of all realisations was required to be remitted. For 2012 the prescribed rate has been increased to 4.4%.
In addition to the A.R.C. trustees are required to invest all funds held in interest bearing accounts and to remit all of the interest received to I.T.S.A. That is, the estate itself does not benefit from any interest earned on money held. Even though the estate does not get the direct benefit, Worrells still invests this money in a high interest earning account so that the maximum benefit can be paid to I.T.S.A.
For the 2010/11 year, Worrells trustees remitted to I.T.S.A. nearly $259,000 in A.R.C. and over $220,000 of interest.
It is sometimes noted that, in relation to corporate insolvencies, A.S.I.C. does not get paid an asset realisation charge and interest earned in liquidations is paid to creditors. However, it may also be noted that A.S.I.C. does not administer unfunded liquidations, but does receive an annual filing fee from each company.
