Entering bankruptcy does not normally prevent you from working. However, when you earn as a bankrupt, you may be required to pay income contributions towards your bankrupt estate. Whether you pay, and how much you pay, depends on your income.
Thresholds are set out by the Australian Financial Security Association (AFSA) and are dictated by the number of dependents you have during the assessment period. Dependents include children and other people who rely on you for financial support.
Thresholds amounts are updated by the AFSA twice a year on 20 March and 20 September. The thresholds current as at March 2024 are as follows:
Number of Dependents | Income Limit |
0 | $70,006.30 |
1 | $82,607.43 |
2 | $88,908.00 |
3 | $92,408.32 |
4 | $93,808.44 |
over 4 | $95,208.57 |
Importantly, it’s not only wages and salary that can assessed. Under section 139L of the Bankruptcy Act, a number of financial gains may be classed as income. These include:
Your bankruptcy trustee will typically make an estimated assessment of your income at the start of each year during bankruptcy. A further assessment based on your actual income will then be conducted at the end of the year. They use information and documents you are required to provide including an income questionnaire, pay-slips, bank statements, payment summaries and tax returns.
Once they have been through the information, they will issue you with an income assessment telling you how much you must pay. You will generally be allowed to pay this amount, known as your income contribution liability, in instalments from your income.
If your after-tax income exceeds the statutory threshold (based on your dependents) then you are liable to pay half of the surplus income above that threshold to your bankruptcy trustee.
For example, if you earned $96,000 after tax and you had two dependents, you would have to pay $3,546 in income contributions i.e. ($96,000 – $88,908.00)/2.
When your trustee is assessing your net income, they will automatically deduct child support payments or other payments required through family court.
In addition, in certain circumstances you may apply to your trustee for ‘hardship’. These circumstances are related to you experiencing significant financial pressure and include:
If the application is successful, it can result in a reduction of the amount of income contributions you need to make.
If you don’t provide the required income information when requested, your trustee may lodge an offence referral with the AFSA resulting in possible prosecution. Alternatively, they may object to your discharge from bankruptcy resulting in it being extended for another five years.
If you fail to pay, the trustee may:
If you don’t agree with the income assessment made by your trustee, or the decision regarding ‘hardship’, you can request a review of their decision by the Inspector-General. The request for review must be lodged within 60 days of notification. If you have any further questions regarding bankruptcy income contributions or would like to discuss your current financial situation, get in touch today.
For more information on bankruptcy, check out or bankruptcy page here.