- Insolvency reforms came into effect on 1 January 2021
- ASIC updates RG 258
- Personal bankruptcy threshold is now $10,000
The latest reforms to corporate insolvency in Australia came into effect on 1 January 2021.
Changes to the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 and amendments to the Insolvency Practice Rules (Corporations) 2016 have affected the requirements for those seeking to become a registered liquidator and registered liquidators maintaining registration. The changes have also resulted in a new ‘class’ of registered liquidator who practices only as a restructuring practitioner for a company or for a restructuring plan.
What are some key changes?
The changes mentioned above have resulted in changes to ASICs guidance Registered liquidators: Registration, disciplinary actions and insurance requirements (RG 258), particularly Section B Becoming a registered liquidator. There are changes to continued professional education for registered liquidators, including restructuring practitioners, how to register as a liquidator and changes to the application process.
Temporary relief extension
Temporary restructuring relief has been extended until 31 March 2021 for eligible companies. The temporary restructuring relief measures include:
- increasing the amount that must be owed to a creditor from $2,000 to $20,000 before the creditor can issue a statutory demand for payment on the company;
- increasing the time a company has to respond to a statutory demand from 21 days to 6 months; and
- providing a director with a temporary safe harbour from personal liability for insolvent trading for debts incurred in the ordinary course of business before any appointment of an administrator or liquidator of the company during the period of safe harbour protection.
ASIC encourages those seeking to understand the small business restructuring process to consider engaging a suitably qualified adviser, such as a financial counsellor, accountant, lawyer or registered liquidator.
For further information on changes to application requirements, how to access extensions for temporary relief and the new structuring and streamlined liquidation process refer to ASIC’s website.
Changes to Personal bankruptcy threshold
In March 2020, The Australian Government introduced temporary bankruptcy measures (in response to COVID-19) which included lifting the personal bankruptcy threshold from $5,000 to $20,000 as well as increasing the statutory period of compliance with a bankruptcy notice and the default period from 21 days to 6 months. These temporary measures expired on 31 December 2020.
As of 1 January 2021, Australia’s new permanent personal bankruptcy threshold is $10,000. The increase was announced in December 2020 by Attorney-General Christian Porter who stated that “The new permanent $10,000 threshold will ensure that Australians in financial difficulty are not made bankrupt over relatively small amounts of debt"
Important changes to liquidator registration
Information about changes to the application and ongoing management requirements to be registered as a liquidator.Read the changes
Applying for and managing your liquidator registration
Information about changes to the application requirements to be registered as a liquidator.Read more
Temporary restructuring relief extension
How to access extensions to the temporary relief provisions.More information
FAQs - Restructuring and the restructuring plan
Further information about entering restructuring and the restructuring plan.Read the plan
Fact-Sheet – simplified debt restructuring
Treasury has published a fact-sheet that outlines the changes and what small businesses need to know.Read the fact-sheet