Remuneration

Information about remuneration of registered and controlling trustees, debt agreement administrators and the Official Trustee.

Registered and controlling trustees

The entitlement of registered and controlling trustees to remuneration is set out in Division 60 of the Insolvency Practice Schedule (Bankruptcy) (which is Schedule 2 of the Bankruptcy Act 1966).

The statutory maximum default amount of remuneration to which these trustees are entitled can be found on the indexed amounts page. For trustees appointed during the 2020–21 financial year, the amount is $5,448. The trustee is entitled to recover up to this amount for work that has been necessarily and properly performed in a bankrupt estate, with the approval of creditors not required.

Where a trustee wishes to claim remuneration above the maximum default amount they need the approval of creditors. If creditors don’t approve remuneration, or if it is not practical to seek the approval of creditors, the trustee can apply to the Inspector-General to have their remuneration determined.

When seeking approval, the information the trustee has to provide to creditors and bankrupts is set out in Inspector-General Practice Direction (IGPD) 18 – Trustee remuneration notifications.

Review of remuneration

A bankrupt person or creditor may apply to the Inspector-General for a review of the trustee's remuneration in a bankrupt estate. The trustee may (at their own initiative or at the request of a creditor or bankrupt person) also apply to the Inspector-General for a review of a bill of costs for services supplied to the trustee by a third party. The Inspector-General’s practice for reviewing the remuneration of trustees and the costs of third party service providers is set out in Inspector-General Practice Statement (IGPS) 16 – Reviewing remuneration of trustees and costs of third party service providers.

The following forms must be used if requesting a review:

Form 28 Application For Review Of Trustee Remuneration (PDF - 94 KB)

Form 29 Application for Approval of Trustee Remuneration (PDF - 667 KB)

Completed forms can be emailed to PractitionerSurveillance@afsa.gov.au or posted to:

National Allocations Team
Enforcement and Practitioner Surveillance
PO Box 10443 Adelaide St
BRISBANE QLD 4001

Debt agreement administrators

The entitlement of debt agreement administrators to remuneration is set out in section 185Z of the Bankruptcy Act. Section 185C provides for a debt agreement proposal including the administrator's remuneration being equal to a specified percentage of the total amount payable by the debtor under the agreement. This remuneration can be taken from payments as they are received.

The Official Trustee in Bankruptcy

The entitlement of the Official Trustee in Bankruptcy to remuneration for its work administering bankrupt estates, debt agreements and personal insolvency agreements is contained in section 163 of the Bankruptcy Act and in the Bankruptcy (Fees and Remuneration) Determination 2015.

More information about the Official Trustee’s remuneration can be found on the Fees and charges page.

Case study: Ms M

A case study examining a complex bankruptcy administration where a person who was bankrupt sought a review of their trustees’ remuneration by AFSA.

An unemployed, person known as Ms M, is made bankrupt for unpaid fees. While unemployed, she was receiving significant ongoing distributions from family trusts to cover her expenses. Either at the time of her bankruptcy or through the course of her bankruptcy, she acquired approximately $6m in assets and had $500,000 in liabilities.

Ten years later, the bankruptcy was annulled after creditors received full repayment of debts including interest. Ms M also received a significant surplus.

This was a complicated bankruptcy administration and Ms M was often uncooperative. It is widely known that these types of administrations are time consuming for trustees. Trustees command high hourly rates for dealing with such complex matters as efficiently as possible.

Ultimately, the trustees charged in excess of $1.2m for the administration of this estate. This amount did not include the trustees’ disbursements or legal fees.

Ms M subsequently sought a review of the trustees’ remuneration by AFSA. While she did not explain why the remuneration was considered excessive, AFSA decided scrutiny of the remuneration was warranted given the amount charged and considering the complexity of the tasks undertaken by the trustees. Upon investigation and review by AFSA, the trustees originally agreed to reduce their remuneration by $5,200. After much negotiation between AFSA and the trustees, it was agreed that $330,000 would be reduced from the total fees of $1.2m. This reduction in fees was returned to Ms M.

Many reasons for the reduction in remuneration are consistent with the themes in AFSA’s Remuneration report which was published in March 2020.

The trustees overcharged and overserviced in the following areas:

work performed at a level not commensurate with the level of complexity
many levels of the trustees’ staff charging time for the same piece of work
a failure to take a minimalist approach in an administration with a significant surplus of assets over liabilities.

The trustees have committed to working with AFSA to improve their processes, systems and controls relating to remuneration. AFSA will be closely monitoring those improvements and if positive changes are not made, will consider formal disciplinary action.

*These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.