New insolvency reforms to support small businesses now in force

Eligible businesses experiencing financial distress can access a new, simplified debt restructuring process which came into force on the 1st January 2021. The reforms are aimed at repositioning the country’s insolvency system to help more incorporated small businesses – with liabilities of less than $1-million to restructure and survive the economic impact of the Covid-19 recession.

Michael Sukkar, the Assistant Treasurer, said: “The reforms are designed to help keep businesses in [operation] and more Australians in jobs.”

Should an eligible business not be able to immediately secure a small business restructuring practitioner to commence this new process, the business can declare its intention to access the process through a notice on the Australian Securities and Investments Commission (ASIC) published notices website.

From the date a declaration is published, temporary relief from insolvent trading liability and responding to statutory demands from creditors applies to the business for up to three months. The ability to declare such an intention will be available until 31 March 2021.

“For those businesses that are unfortunately unable to survive the economic impacts of the Covid-19 recession, a new simplified liquidation pathway will be available to allow faster and lower-cost liquidation, increasing returns for creditors and employees.

“Together, these measures will reduce costs for small businesses, reduce the time they spend in insolvency process, promote greater economic dynamism, and ultimately help more small businesses through the recovery phase of the COVID-19 recession,” Sukkar said.

TaxAssist Accountants is here to help and support small businesses through the pandemic and beyond. Call in for help and advice with any of the above.

Date published 7 Jan 2021 | Last updated 7 Jan 2021