Ahead of next week’s federal budget, the Morrison Government has decided to pursue further measures to improve Australia’s insolvency framework for businesses.

Most notably, the threshold for which a creditor can issue a statutory demand on a company will increase from $2 000 to $4 000, this change is scheduled to take effect on 1 July 2021.

Other reforms being considered are:

  1. Changing how trusts are treated under insolvency law;
  2. a review of whether Safe-Harbour provisions, introduced in 2017, should remain; and
  3. introducing moratoriums on creditor enforcement while insolvency schemes are being negotiated

The changes being considered will build on the reforms which came into effect on 1 January of this year that streamlined the insolvency process and provided directors with greater control to restructure or wind down their operations. These changes were subject of a prior post which you can access here.

A copy of the Treasurer’s media release issued on 3 May 2021 can be accessed here.

With insolvency becoming an evolving space, professional legal advice is key for all businesses.