{"id":"C2004A02470","name":"Crown Debts (Priority) Act 1981","slug":"crown-debts-priority-act-1981","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"93 of 1981","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":6947,"registerId":"commonwealth-C2004A02470-current","compilationNumber":null,"startDate":"2026-03-30","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Short title [see Note 1]","content":"#### 1 Short title \\[see Note 1\\]\n\n  This Act may be cited as the Crown Debts (Priority) Act 1981.","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Commencement [see Note 1]","content":"#### 2 Commencement \\[see Note 1\\]\n\n  This Act shall come into operation on the day on which the Companies Act 1981 comes into operation.","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Crown subject to State and Territory laws with respect to priority","content":"#### 3 Crown subject to State and Territory laws with respect to priority\n\n  Notwithstanding any prerogative right or privilege of the Crown in right of the Commonwealth, the Crown in right of the Commonwealth is subject to any provision of a law of a State or Territory:\n    (a) relating to the order in which debts or liabilities of a body (whether corporate or unincorporate) are to be paid or discharged;\n    (b) relating to the avoidance of preferences received by creditors of a body (whether corporate or unincorporate); or\n    (c) relating to the effect on creditors or members of a body (whether corporate or unincorporate) of a compromise or arrangement between the body and another person or other persons.","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Certain rights of the Crown not affected","content":"#### 4 Certain rights of the Crown not affected\n\n  Nothing in section 3, or in the Corporations Act 2001 affects the operation of former subsections 221YHJ(3), (4) and (5) or 221YHZD(3), (4) and (5) or former section 221YU of the Income Tax Assessment Act 1936 or of section 32 of the Life Insurance Policy Holders’ Protection Levies Collection Act 1991.\n\n> Note: The provisions of the Income Tax Assessment Act 1936 referred to do not apply to liabilities arising after 30 June 1993.","sortOrder":3}],"analysis":{"kimi_summary":{"_metrics":{"source":"grok-batch-everything"},"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"The legislation has not grown beyond its original 1981 purpose of subjecting Commonwealth prerogative rights to state and territory laws on debt priority, preferences and compromises. Subsequent amendments have been limited to updating cross-references (e.g. from the Companies Act 1981 to the Corporations Act 2001) and adding a savings note for post-1993 tax liabilities; the substantive scope remains narrowly focused on insolvency priority."},"complexity_factors":["Extremely short operative text (only four sections)","Heavy reliance on undefined terms drawn from the Corporations Act 2001 and state/territory insolvency statutes","Notional cross-references to repealed or 'former' provisions of the Income Tax Assessment Act 1936 and the Life Insurance Policy Holders’ Protection Levies Collection Act 1991","Use of a 'notwithstanding' clause that interacts with both common-law prerogative and later Commonwealth statutes"],"plain_english_summary":"**The Crown Debts (Priority) Act 1981 makes the federal government play by the same rules as everyone else in company and organisation wind-ups.**\n\nIn simple terms, when a company, partnership or other body (incorporated or not) is being wound up, enters a repayment plan with creditors, or faces claims of unfair payments to certain creditors, the Australian Government (the 'Crown in right of the Commonwealth') must follow the priority rules set by each state or territory law. \n\nNormally governments have ancient special rights (called prerogative rights) that could let them jump the queue and get paid before other creditors. This Act removes those special rights for three main areas: the order in which debts are paid, rules that cancel unfair 'preferences' given to some creditors, and the impact of any compromise or arrangement the body makes with its creditors. \n\nA small but important carve-out keeps certain old tax-collection powers and life-insurance levy rules untouched. The law therefore promotes fairness between the Commonwealth and private creditors while preserving a handful of specific federal tax safeguards."},"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The Act’s operative text implements a single, specific change: it subjects the Crown in right of the Commonwealth to State and Territory laws in three defined areas (order of payment, avoidance of preferences, and effect of compromises/arrangements) and preserves specified existing Crown rights (s 3–4). The text does not expand beyond that stated purpose; commencement is linked to the Companies Act 1981 (s 2) and the Note records a temporal qualification for certain Income Tax Assessment Act provisions."},"complexity_factors":["Cross-references to multiple external statutes (Companies Act 1981 for commencement; Income Tax Assessment Act 1936 and Life Insurance Policy Holders’ Protection Levies Collection Act 1991 for preserved rights) (ss 2, 4).","Interplay between Commonwealth prerogative rights and State/Territory laws requiring interpretation of constitutional and statutory boundaries (s 3).","Variation across States and Territories: the Act imports differing local priority and avoidance regimes rather than a single uniform rule (s 3).","Temporal qualification noted for the Income Tax Assessment Act provisions referenced in section 4, which limits application after a specified date (Note).","Concise text that nevertheless requires administrators to identify which State or Territory provisions apply and whether preserved Crown rights are engaged (ss 3–4)."],"plain_english_summary":"What this law does (mechanically)\n\n- It makes the Commonwealth’s financial claims subject to State and Territory laws that set the order in which a body’s debts are paid, that allow avoidance of preferential payments to some creditors, and that govern how compromises or arrangements affect creditors and members. (See section 3.)\n- The Act takes effect when the Companies Act 1981 comes into operation. (See section 2.)\n- The Act preserves certain Crown rights already set out in specified provisions of earlier Acts; those preserved rights continue to operate despite section 3. (See section 4 and the Note about the Income Tax Assessment Act 1936 provisions.)\n\nWho is affected and who decides\n\n- The Crown in right of the Commonwealth is the party whose treatment in insolvency and related distribution rules is changed: it becomes subject to relevant State and Territory laws about priority and avoidance of preferences. (s 3)\n- State and Territory statutes and the authorities applying them determine the detailed order of payment, whether particular transactions can be set aside as preferences, and the consequences of compromises or arrangements for creditors and members. The Act requires the Crown to follow those rules. (s 3)\n\nImmediate, concrete effects on behaviour and incentives\n\n- Administrators, liquidators or other officers dealing with the assets and liabilities of a body must apply the relevant State or Territory priority and avoidance rules to claims by or against the Commonwealth, rather than treating the Commonwealth as immune from those rules. (s 3)\n- Creditors and the Commonwealth can expect changes to the ranking of claims in insolvency or distribution processes where State or Territory laws prescribe an order of payment or allow avoidance of preferences. (s 3)\n- The Commonwealth retains specific statutory rights preserved by section 4; those preserved rights continue to operate alongside the State/Territory rules identified in section 3. (s 4)\n\nCosts, compliance burdens and decision authority (mechanisms, not verdicts)\n\n- Who pays: the practical effect is that the Commonwealth’s claims can be ranked and treated under State/Territory priority rules; this can alter whether and how much the Commonwealth receives in a distribution under those rules. (s 3)\n- Who decides: the content of ordering and avoidance rules is set by each State and Territory law; officers administering an insolvency apply those laws to Crown claims. (s 3)\n- Compliance burden: insolvency administrators must identify and apply the correct State or Territory provisions to Crown claims and check for the preserved exceptions in section 4 and any temporal limitations noted in the Act. (s 3–4)\n- Bureaucratic discretion and implementation risk: the Act imports differing State and Territory priority and avoidance regimes into the treatment of Commonwealth claims, so outcomes will depend on the particular provisions and their interpretation in each jurisdiction. (s 3)\n\nTrade-offs and concrete limits\n\n- The Act replaces the effect of any prerogative right or privilege of the Crown in right of the Commonwealth in the specific fields listed (order of payment, avoidance of preferences, and effect of compromises/arrangements) by subjecting the Crown to State/Territory laws. (s 3)\n- Section 4 limits that displacement by preserving specific statutory Crown rights identified by reference to prior Acts; those preserved rights continue to operate where they apply. (s 4 and Note)\n\nPractical takeaway\n\n- From commencement (tied to the Companies Act 1981) the Commonwealth’s ranking and treatment as a creditor in areas described in section 3 will be governed by State and Territory laws, except where section 4 preserves particular statutory Crown rights. Administrators and parties must apply the relevant local priority and avoidance rules and check the preserved exceptions in section 4. (s 2–4)"},"summary":{"complexity_score":3,"scope_assessment":{"changed":false,"description":"The Act remains tightly focused on its original purpose: removing Commonwealth Crown priority in insolvency and related proceedings under State and Territory laws. The carve-out in section 4 was part of the original design and the note confirming the Income Tax provisions no longer apply post-1993 reflects legislative evolution rather than scope change. The Act has not expanded or contracted meaningfully from its original intent."},"complexity_factors":["References to repealed or superseded provisions of the Income Tax Assessment Act 1936 (former subsections 221YHJ and 221YHZD) that require historical knowledge to understand","Requires understanding of the common law concept of Crown prerogative to appreciate what the Act is abolishing","Cross-references to multiple Acts including the Corporations Act 2001 and Life Insurance Policy Holders' Protection Levies Collection Act 1991","The carve-out in section 4 creates an exception to the exception, requiring careful reading","Short and technically precise — few words carry significant legal weight"],"plain_english_summary":"## Crown Debts (Priority) Act 1981\n\n### What does this law do?\n\nThis short but important Act strips the Australian federal government (called \"the Crown in right of the Commonwealth\") of a special legal privilege it would otherwise enjoy when businesses go broke.\n\n### The old privilege it removes\n\nHistorically, the Crown (government) had a prerogative right (a special inherited privilege dating back to English common law) to be paid first when a company or organisation became insolvent (ran out of money and couldn't pay its debts). This meant the government could jump to the front of the queue ahead of ordinary creditors — like suppliers, employees, or banks — when a business collapsed.\n\n### What it now requires\n\nThe federal government must follow the **same rules as everyone else** when it comes to:\n- **The order debts get paid** when a company winds up (goes into liquidation)\n- **Preference payments** — rules that prevent certain creditors being sneakily paid out ahead of others before a collapse\n- **Compromises and arrangements** — agreements between a struggling company and its creditors about how debts will be settled\n\nThese rules are set by State and Territory laws (primarily insolvency and corporations laws).\n\n### Who does this affect?\n\n- **Businesses in financial difficulty** and their creditors benefit, because the government can't unfairly jump the queue\n- **Banks, suppliers, and employees** owed money by a failing company get fairer treatment\n- **Tax authorities** (like the ATO) must line up with other creditors under normal rules\n\n### Important carve-out\n\nSection 4 preserves some older special tax collection powers under the *Income Tax Assessment Act 1936* — though a note confirms these stopped applying to new liabilities after 30 June 1993, so they are largely historical.\n\n### Why does it matter?\n\nWithout this Act, the federal government could effectively disadvantage ordinary Australians and businesses owed money by a collapsed company, simply by pulling rank. This law ensures fairness in insolvency proceedings."},"issue_detection":{"absurdities":[{"type":"other","section":"2","severity":"low","reasoning":"The Act commences on the day the Companies Act 1981 comes into operation. The Companies Act 1981 has itself been repealed and replaced by the Corporations Act 2001. While this is a historical drafting technique that was functional at the time, the commencement provision now references a repealed Act, creating potential ambiguity about whether the commencement date can be readily ascertained without tracing legislative history. In practice this is resolved by historical record, but the provision is now a dead letter that serves no operative purpose.","confidence":0.55,"description":"Commencement tied to another Act that has since been repealed and superseded"},{"type":"other","section":"4","severity":"medium","reasoning":"Section 4 actively preserves the operation of former subsections 221YHJ(3),(4),(5) and 221YHZD(3),(4),(5) and former section 221YU of the Income Tax Assessment Act 1936, yet the accompanying Note concedes these very provisions 'do not apply to liabilities arising after 30 June 1993.' This means the operative carve-out in section 4 protects provisions that have been functionally spent for decades. The section therefore creates a legislative exception to section 3 that has no practical application to any modern liability, yet remains on the books as active law. This is not technically self-contradicting but is logically absurd in that Parliament is actively preserving a carve-out to protect provisions that cannot apply to any current or future transaction.","confidence":0.82,"description":"Preservation of provisions explicitly noted to be inoperative after 30 June 1993"},{"type":"impossible_compliance","section":"4","severity":"medium","reasoning":"Section 4 references 'former subsections 221YHJ(3), (4) and (5) or 221YHZD(3), (4) and (5) or former section 221YU of the Income Tax Assessment Act 1936.' The qualifier 'former' acknowledges these provisions have been repealed. A court or administrator seeking to apply section 4 must give effect to provisions that no longer exist in any current statute. While transitional principles allow reference to repealed provisions for pre-cutoff liabilities, drafting an ongoing Act around explicitly 'former' provisions creates a structural absurdity where the operative carve-out points to a legislative void.","confidence":0.75,"description":"Reference to 'former' provisions that no longer exist in any operative statute"}],"contradictions":[{"severity":"medium","section_a":"3","section_b":"4","confidence":0.78,"description":"Section 3 uses the word 'Notwithstanding' to override Crown prerogative rights and subject the Commonwealth Crown to all State and Territory priority laws without qualification. Section 4 then reintroduces specific Crown priority-adjacent rights under the Income Tax Assessment Act 1936 and the Life Insurance Policy Holders' Protection Levies Collection Act 1991 as unaffected by section 3. This creates an internal tension: section 3 purports to be a comprehensive subjection of the Crown to priority laws, while section 4 preserves islands of Crown privilege that section 3 ostensibly abolished. The practical effect is that section 3's 'notwithstanding' language is not as absolute as it appears on its face."}]}},"importantCases":[],"_links":{"self":"/api/acts/crown-debts-priority-act-1981","history":"/api/acts/crown-debts-priority-act-1981/history","analysis":"/api/acts/crown-debts-priority-act-1981/analysis","conflicts":"/api/acts/crown-debts-priority-act-1981/conflicts","importantCases":"/api/acts/crown-debts-priority-act-1981/important-cases","documents":"/api/acts/crown-debts-priority-act-1981/documents"}}