If that sounds like you, it’s worth noting that Australia’s new insolvency regime kicked off on January 1, and its aim is to give you some relief.
Announced by Treasurer Josh Frydenberg in September, the reforms to Australia’s insolvency regime include temporary restructuring relief as well as a new restructuring process for eligible companies, including salons.
The temporary restructuring relief is designed to give company directors time to consider if their business can undertake a restructure process.
Registering for the restructuring relief prevents creditors who are owed less than $20,000 from issuing statutory demands to wind up the company; and gives directors a period of six months to respond to statutory demands. It also provides for a temporary safety from personal liability associated with insolvency trading.
The temporary restructuring relief is available until March 2021, meaning directors must apply before that date to access the provisions.
Credit reporting bureau CreditorWatch is now sending out real-time alerts to its database of 50,000 businesses to notify them if a debtor has declared eligibility for the temporary restructuring relief.
CreditorWatch Patrick Coghlan says it is difficult to predict how many businesses will seek to use this new process over coming months, the majority of businesses that do go into external administration each year would be eligible for new arrangements.
With fewer SMEs going into administration during 2020 as a result of government support programs, Coghlan says it is “very possible” we may see between 2,000 and 3,000 companies use the new arrangements this year as those government programs are wound back.
“I don’t think it will be that high, as many businesses are now in a much better position,” he says. “It is likely ASIC and the ATO won’t be as aggressive as they were pre-COVID in relation to debts and insolvent trading claims, but it is very possible and no one should be surprised.”
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