{"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":{"issue_detection":{"absurdities":[],"contradictions":[]},"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."},"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":"The law makes the Commonwealth’s claims in insolvency and distributions subject to State and Territory rules on payment order, avoidance of preferences, and the effect of compromises — so administrators, liquidators and creditors must apply local priority and avoidance laws to Crown claims. It takes effect on commencement of the Companies Act 1981 but preserves certain specific statutory Crown rights listed in section 4."},"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."}},"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"}}