Personal Insolvency Agreement Costs

Identify the Work and Proposed Agreement

A personal insolvency agreement (PIA) is an individual’s arrangement with creditors under Part X of the Bankruptcy Act 1966. Its costs begin before creditors decide whether to accept it.

Separate the initial assessment from the controlling trustee’s appointment. Initial advice can address the debtor’s financial position and possible proposal terms. Record the adviser and who pays. Show whether the payment is credited against later work.

The controlling trustee then investigates the debtor’s affairs and prepares the proposal material for creditors. An accepted agreement creates a further administration stage, which can involve collecting contributions, dealing with claims and distributing money. The controlling trustee and agreement trustee can be the same practitioner, but their work covers different stages. AFSA’s PIA setup guidance explains this sequence.

For each quotation, identify the appointment covered, the work included and the point at which the quoted work ends. Record what remains payable if creditors reject the proposal. A preparation fee does not establish the cost of administering an agreement that runs for several years.

A company’s deed of company arrangement follows corporate insolvency law. Its administrator’s fee proposal cannot be used as the authority for an individual’s Part X remuneration.

Separate Professional and Statutory Charges

Professional remuneration, external expenses and statutory charges need separate entries in the proposal budget. They have different calculation methods and approval requirements.

AFSA’s trustee fee guidance describes fixed amounts, time-based remuneration and percentage methods. Read the actual terms for the appointment. For hourly work, show the staff rates, estimated hours and any approved cap. For a fixed fee, identify its scope and exclusions. Percentage terms need their calculation base and applicable statutory limits.

Show GST explicitly for professional fees and external expenses. Record whether each amount is tax-inclusive and how any recoverable GST affects the estimated distribution. Legal advice, valuation work and statement analysis can create separate expenses even where the trustee’s own remuneration is fixed.

Published Government Charges

The Australian Financial Security Authority (AFSA) fee schedule identifies charges separately from a registered trustee’s quoted remuneration.

The realisations charge is calculated on receipts, not the dividend left after professional fees. Money already counted in one stage must not be counted again merely because it passes to the agreement trustee. The chargeable-receipts reconciliation must identify transfers and exclusions under section 8 of the Estate Charges Act.

The schedule also lists fees for administration by the Official Trustee. Those entries are not a standard price list for every registered trustee. Identify the appointed officeholder before selecting the applicable fee basis.

Show the Creditor Return After Costs

The creditor return is the distributable fund after the agreement’s costs and applicable claims priorities. Gross contributions alone do not show what creditors receive.

Fictional Contributions-to-Distribution Comparison

This example compares two possible outcomes before either appointment begins. Both use $40,000 of available asset proceeds, $60,000 of contributions and $200,000 of ordinary unsecured claims. The contributions are assumed available under either option solely for this illustration.

All professional fees and external expenses below are fictional cash budgets including GST. The example assumes no GST credits, priority claims or interest income. The full $100,000 is assumed chargeable at 7% under either option.

The PIA’s $20,000 professional budget comprises $2,000 for initial assessment, $10,000 for controlling-trustee work and $8,000 for agreement administration. Every amount is assumed paid from the fund. The bankruptcy budget covers the professional work required for that alternative.

A disputed recovery estimated at $20,000 sits outside both base cases. Record its legal basis and collection risk separately, together with the extra costs required to pursue it. If recovered in full with $5,000 of additional expenses, a 7% realisations charge leaves $13,600 extra for distribution under these assumptions.

That calculation is $20,000 less $5,000 less $1,400. It adds 6.8 cents per dollar to the illustrated dividend. An identified transfer is not itself cash available to distribute.

For an actual proposal, use the same asset valuations and liability evidence across both options. Explain differences in what each option can collect, including conditional third-party funding or recoveries available only in bankruptcy. A PIA does not always cost less or produce the better return. The separate trustee in bankruptcy guide explains that officeholder’s wider role.

Support the Inputs With Statement Evidence

Reconcile each proposed contribution to its funding source. Keep internal transfers out of income totals and distinguish money already received from future payments. Attach source references to disputed transactions so the cost of pursuing a recovery can be assessed against its possible net return.

FinTrace saves insolvency practitioners and forensic accountants hours of statement conversion and review. It processes large PDF bundles into a searchable Excel ledger and a written findings report. Suspicious transactions are clearly flagged, with each finding connected to its source PDF filename and page.

For that statement-analysis work, FinTrace costs a fraction of manual review or engaging a forensic accountant to perform the same task. Its written quotation uses a fixed base fee plus a per-page component according to scope. Include the accepted quotation as a separate budget item when this work is required.

Explain Approval, Changes and Reporting

Acceptance of the PIA and approval of trustee remuneration are separate decisions. A creditor needs both the proposed agreement’s terms and enough information to assess the remuneration requested.

Under Part X of the Bankruptcy Act, the controlling trustee’s section 189A report supports the proposal decision. Acceptance requires a special resolution under section 204. A majority in number and at least 75% in debt value of voting creditors must support it.

Division 60 of the remuneration framework governs registered-trustee remuneration. Creditors can determine remuneration, with other statutory determination routes available in the specified circumstances. Time-based remuneration determinations require a cap under section 60-12(2). Identify the period and work covered by the proposed approval.

The Insolvency Practice Rules (Bankruptcy) 2016 distinguish the initial remuneration notice from the report supporting a remuneration determination. Rule 70-45 requires enough information to assess reasonableness, including the work and its cost. The report also explains the likely dividend impact.

A controlling trustee sends an initial remuneration notice. If a different trustee administers the accepted PIA, that trustee sends one within 20 business days after execution. AFSA explains that a second initial notice is unnecessary where the same trustee continues into the PIA.

When extra work changes the budget, show the revised cost to complete and resulting dividend. Separate an updated estimate from any additional remuneration approval required. A change to remuneration does not itself amend contribution obligations or other agreement terms.

Section 221A provides the agreement-variation procedures, including creditor special resolution with the debtor’s written consent. Record the applicable procedure and its notices alongside the revised financial comparison. AFSA’s remuneration-notification guidance explains the separate remuneration reports and claim notices.

Give creditors a reconciled explanation of money available, costs already paid and costs still expected. Identify each approval sought and show what it changes in the estimated distribution. That lets creditors decide on the agreement and remuneration with the financial effect in view.