Quick Answer
It depends on your appointment type. Court-appointed liquidators and trustees in bankruptcy get exclusions for Items 1, 2, 3 and 7. But creditor-appointed receivers and members' voluntary liquidations get no exclusions. And Item 6 (Restructuring) is never excluded regardless of appointment type.
The s 6(5E) Exclusion Explained
Section 6(5E) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 provides a limited exclusion for certain insolvency practitioners. But it is narrower than many practitioners assume.
What Happened During Consultation
During the 2024 consultation phase, industry bodies including ARITA (Australian Restructuring Insolvency & Turnaround Association) argued that insolvency practitioners are already heavily regulated and that the ML/TF risk is low because practitioners take control of assets, effectively displacing potential criminals from control.
While the government acknowledged these submissions, they largely retained the activity-based definition. This means unless AUSTRAC issues a specific "Insolvency Rule" exemption (which they have the power to do under the Act, but have not guaranteed), you must assume you are caught for non-court appointments.
What IS Excluded (s 6(5E))
- Registered liquidators appointed by a court (Items 1, 2, 3, 7)
- Trustees in bankruptcy appointed by court or AFSA (Items 1, 2, 3, 7)
- Other persons acting pursuant to court or tribunal orders
What is NOT Excluded
- Creditor-appointed receivers (private appointment, no court involvement)
- Members' voluntary liquidations (MVL) (shareholder resolution, no court)
- Voluntary administrators (pre-DOCA, before court involvement)
- Controllers appointed by secured creditors under security documents
The Restructuring Trap (Item 6)
Item 6 of Table 6 covers "Creation or Restructure of a Body Corporate or Legal Arrangement". This is where insolvency practitioners are most likely to be caught, because there is no s 6(5E) exclusion for Item 6.
AUSTRAC Guidance on Restructuring
"An insolvency practitioner changing a company limited by guarantee into a company limited by shares, splitting one body corporate into multiple bodies corporate or merging multiple bodies corporate are examples of a restructure. The insolvency practitioner would be helping their client to directly advance the restructure of a body corporate."
"An insolvency practitioner that assists a body corporate to restructure its internal governance and business operations, including reducing staff numbers at a particular plant or focusing on producing more profitable product lines, isn't providing a designated service as this doesn't change the legal structure of the body corporate."
IS a Designated Service
- • Changing company type (Ltd → Pty Ltd)
- • Splitting one entity into multiple entities
- • Merging multiple entities into one
- • Creating new holding company structures
NOT a Designated Service
- • Reducing staff numbers
- • Changing product lines
- • Internal governance changes
- • Business strategy adjustments
Which Items Affect Insolvency Practitioners?
The following table maps Table 6 Items to typical insolvency activities and shows whether the s 6(5E) exclusion applies:
| Item | Activity | s 6(5E) Exclusion? |
|---|---|---|
| Item 1 | Real estate transfers in administration | Yes (court/AFSA only) |
| Item 2 | Business/company transfers | Yes (court/AFSA only) |
| Item 3 | Holding/managing client assets | Yes (court/AFSA only) |
| Item 6 | Restructuring entities | NO - Never excluded |
| Item 7 | Acting as trustee/nominee | Yes (court/AFSA only) |
Critical Point
Even if you are a court-appointed liquidator with the s 6(5E) exclusion for Items 1, 2, 3 and 7, you are still caught by Item 6 if you assist with legal restructuring (e.g. converting company type, splitting entities, merging entities).
What Should You Do?
- Determine your appointment type
Court/AFSA appointment = potential exclusion. Private/creditor appointment = no exclusion.
- Map your activities to Table 6 Items
Identify which of Items 1, 2, 3, 6, 7, 8, 9 are relevant to your practice.
- Assess whether s 6(5E) applies
Remember: it only applies to Items 1, 2, 3, 7 and only for court/AFSA appointments.
- Enrol with AUSTRAC if required
If you provide any designated service without an applicable exclusion, you must enrol as a reporting entity.
Key Takeaway
Insolvency practitioners cannot assume they are excluded from AML/CTF obligations. The s 6(5E) exclusion is appointment-specific and item-specific. Restructuring activities (Item 6) that change legal structure are never excluded. If you are unsure whether your activities trigger designated services, seek specific advice.