On 3 May 2021, the Treasurer announced further insolvency law reform involving how trusts are treated, the ‘insolvent trading safe-labour changes and a moratorium on collection actions whilst a scheme of arrangement is in force. It will also increase the size of the debt, that can trigger a ‘statutory demand’ for payment (on pain of winding up) from $2,000 to $4,000.
See below for further details.
On Monday 3.5.21, the Treasurer announced that the Government is looking at more measures “to further simplify and streamline” insolvency law by:
- consulting on how trusts, which are commonly used by small businesses, are treated under insolvency law.
- reviewing whether the insolvent trading safe-harbour provisions, which were introduced in 2017, remain ‘fit for purpose’. They were designed to promote a “culture of entrepreneurship and innovation” by providing “breathing space” for distressed businesses.
- consulting on improving schemes of arrangement processes to better support businesses, including the introduction of a moratorium on creditor enforcement while schemes are being negotiated.
Importantly, the Treasurer also announced that the threshold at which creditors can issue a statutory demand on a company will be increased from $2,000 to $4,000.
In the 2020–21 Budget, the Government announced the most significant reform to Australia’s insolvency framework in 30 years. These reforms came into effect on 1 January 2021 and created a new simplified restructuring and liquidation process for small companies and has given directors the control and flexibility they need to either restructure or wind down operations. The Government says it remains committed to further simplifying and streamlining insolvency law so that viable businesses that do encounter economic challenges have the opportunity to restructure and go on trading.
[5.5.21; LTN 82, 3.5.521]