AUTHORS

Andrew Bowcher
Andrew Bowcher
Partner

In what could be the biggest shake up of our nation’s bankruptcy system in over three decades, the Australian Government is moving forward with a comprehensive review of personal insolvency and bankruptcy laws.

The review began in early 2021 when the Morrison Government identified a need to help more small businesses restructure to survive the economic impact of COVID-19. 

At the time, proposed changes included:

  • Reducing bankruptcy to one year
  • Promoting debt agreements
  • Targeting untrustworthy advisors

A public consultation was held to invite feedback from a diverse audience including members of the public, insolvency practitioners, consumer advocates, and peak bodies. The results of the consultation were published in early 2022 by the Attorney-General’s Department.

The Albanese Government has since confirmed that the review will continue, citing a need to support struggling businesses and ensure insolvency is always seen as a last resort. 

Ministerial roundtable

Last month, the Attorney-General held a roundtable with representatives from consumer groups and the credit, finance, accounting and legal sectors. The purpose was to facilitate discussion on personal insolvency priorities and emerging issues, to assist in the development of law reform.

The event was well-attended and included representatives from a wide range of organisations – such as the Australian Banking Association, Australian Financial Complaints Authority, CA Australia and New Zealand, CPA Australia, Financial Counselling Australia, and the Small Business Debt Helpline. 

Several reform priorities were identified, including:

  • An increase to the bankruptcy threshold value from $10,000
  • Reducing the bankruptcy period
  • Changes to annulments for inappropriate bankruptcies
  • Longer periods to respond to bankruptcy notices
  • Stronger regulation in the pre-insolvency space

These were in addition to numerous other reform opportunities on everything from better access to financial education to an insolvency regime specific to small business. 

What’s next

As businesses struggle with inflation, rising interest rates and serious skills shortages, the potential for regulatory change would be welcomed by many. 

This is especially true of changes that would create more breathing room for those under financial pressure, where time to resolve prevailing issues could lead to better outcomes. 

As we await new announcements regarding the reform, we would remind anyone facing financial hardship that they don’t have to go it alone. You do have options, and sometimes it only takes a review of your current state to plot a path to safety. 

We offer a free initial consultation so there are no cost barriers, with a confidential discussion between you and an adviser from our business advisory or restructuring and recovery teams which could help you gain the confidence you need to move forward.  

For more information

For a free and confidential discussion with our business advisory or restructuring and recovery teams, please contact your local RSM office. 

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