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Temporary insolvency and bankruptcy protections initially in place until 30 September have been extended until 31 December 2020.

With insolvencies down 60 per cent this year compared to 2019, removal of these measures could have resulted in a spike in insolvencies. How would this affect the economy? A rise in insolvencies would result in increased unemployment and a decline in consumer and business confidence.

As we’ve seen with the recent market volatility, when consumer confidence is lost, often increased volatility follows.

What are the temporary measures?

  • An increase in the amount of debt that a business can hold before a creditor can make a statutory demand for payment from $2000 to $20,000.
  • An extension in the time a debtor has to respond to a creditor demand for payment from 21 days to 6 months.
  • An increase in the time a debtor has to respond to a bankruptcy notice from 21 days to 6 months.
  • If a business decides to file for bankruptcy voluntarily, unsecured creditors will need to wait 6 months to claim against the business to recover debts as opposed to 21 days.
  • The rate of debt has increased from $5,000 to $0,000 before a creditor can initiative bankruptcy proceedings.
  • Directors are temporarily resolved of personal responsibility for trading under conditions of possible or actual insolvency (excluding cases of dishonesty or fraud).

More can be found on proposed insolvency reforms here.

Is this a time of opportunity?

Now could be a great opportunity for business development work, taking a look at cash flow or restructuring business plans to create a resilient business capable of not only surviving the pandemic but achieving growth.

Wondering how the Federal Budget announcements may affect you?

Now that the Federal Budget 2020 has been announced, you may be asking yourself, how will these changes affect me?

We’ve put together all of Budget information in one place, and included our live webinar recording where our experts discuss the key changes and possible implications and opportunities for you post-announcement.

WATCH NOW

This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.