Education is the key to reform

A central theme of the submission is that timely education for business owners and directors over the lifecycle of a business would do more to improve business dynamism than introducing new regulations. We note that many business owners simply “do not know what they do not know”, particularly when navigating obligations spread across Commonwealth, state and territory agencies.

Our submission calls for regulators to take a more proactive role in providing targeted education throughout the business lifecycle. Recommended measures include:

• ASIC providing new directors with simple summaries of their key personal liabilities and obligations.
• Director ID applicants receiving practical information about director responsibilities and the agencies responsible for enforcing them.
• Ongoing education for directors through annual company statements and business name renewal notices. 

Entry and expansion

We acknowledge that Australia has relatively low barriers to business entry, with low registration costs and straightforward incorporation processes. However, compliance complexity grows as businesses expand, particularly when operating across multiple states and territories. Differences in payroll tax thresholds, long service leave schemes and other regulatory requirements require business owners to spend considerable time on compliance rather than growth and innovation.

To address this, we recommend greater cooperation and data sharing between government agencies. For example, regulators could use existing payroll and employment data to notify businesses when they become liable for payroll tax or other obligations, helping business owners remain compliant and avoid unexpected penalties that can lead to financial stress.

Exit

We note that company deregistration processes can occur with limited scrutiny, creating opportunities for misconduct and reducing transparency for creditors. More than 80,000 voluntary deregistration applications and approximately 50,000 ASIC strike-offs occur each year. 

To strengthen the system, we recommend automatic checks between ASIC and the Australian Taxation Office (ATO) before companies are deregistered. It also proposes expanding ASIC’s powers to disqualify directors where false deregistration declarations are made or companies do not pay their ASIC fees.

Insolvency processes

We support greater harmonisation between corporate and personal insolvency frameworks and identify several opportunities to improve efficiency. 

Recommended reforms include:

• Free access to government-held data for registered liquidators and trustees.
• Broader investigation powers for registered liquidators to better detect and deter phoenix activity.
• Faster ATO response times to ensure capital is resdistributed to creditors as soon as practiable.
• Reduced reporting burdens and administrative delays within ASIC processes.

We argued that a more efficient insolvency framework would enable capital and resources to be reallocated more quickly to productive uses, supporting a more dynamic and resilient economy. 

By improving education, coordination between regulators and the effectiveness of insolvency frameworks will free capital into the economy to support dynamic businesses.