Bankruptcy and Income Contributions
Bankrupts are required to pay contributions to their estate from their income: Bankruptcy Act 1966 (Cth) Part VI Division 4B. The minimum income for compulsory contributions is referred to as the base income threshold amount (BITA), with increases to this amount where the bankrupt has dependants. At 30 June 2011, the BITA was $46,018.70. A bankrupt’s income is assessed against the BITA every 12 months in order to determine their liability to make contributions. According to the 2010-2011 Annual Report of the Inspector-General, income contributions in excess of $43 million were paid by over 7,000 bankrupts in that period.
The law had not previously addressed how to calculate an income assessment of a bankrupt with a foreign income. The AAT has decided that the foreign income amount should be converted into Australian dollars based on the exchange rate at the time of the income assessment. It overturned a decision of the Inspector-General, who had used
the rate as at the time each item of income was earned: Sheikholeslami v Inspector-General in Bankruptcy  AATA 670.
In the bankrupt’s case, the exchange rate at the time of her income assessment was significantly more favourable to her than the exchange rates throughout the time she derived the income.
The AAT said that although there is no provision in the Bankruptcy Act which specifically deals with the issue, and although there has been no judicial or Tribunal consideration,
“an ordinary reading of the relevant provisions requires the foreign income of the bankrupt to be converted to Australian dollars at the time of the income contribution assessment.”
It is of course a matter for the legislature to change this if there are policy reasons to do so.