Temporary Changes In Australian Insolvency Laws Due To COVID-19

The Federal Government of Australia has passed a few amendments to corporations, and insolvency laws due to challenges posed by COVID-19. These changes will apply to several otherwise lucrative and viable businesses. Let us learn about these changes in insolvency laws.

Changes in Insolvency laws made by a government

Australian Government has made changes that are specified in Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020. This act is passed on 23 March 2020 in both Houses of Parliament. on 24 March 2020, the act received Royal assent.

Insolvency Experts is a trusted and expert firm that has more than twenty-five years of experience in helping businesses in dealing with complex cases such as liquidation, and insolvency.

The act mentions changes that are meant for:

  • Businesses and directors to assist them to work in an impermanent duration of illiquidity than voluntary liquidation, or administration
  • Individuals to help them in managing debt and avoid bankruptcy
  • Directors will get temporary relief from the dangers related to personal liability for “insolvent trading”. It is applicable in those cases where the debts have occurred in the ordinary operation of the business. This kind of temporary relaxation will work for at least six months beginning from 25 March 2020.
  • Along with the minimum limit at which credit lending firms can issue a legal demand has risen from $2,000 to $20,000 for six months, firms are provided with six months to respond to a legal demand in place of twenty-one days. Some of the other measures are described in detail as follows.

Who will benefit from these temporary changes in insolvency laws?

The measures taken by the government will be welcoming for corporate boards that are facing the indeterminate effect of COVID-19 on their and cashflow state, and business. These measures will help various firms so that they can continue trading via the present time of disruption, in place of appointing outside administrators.

What are the unlikeable impacts of these changes in insolvency laws?

The measures taken up by the government will make it hard for suppliers and creditors to recuperate from overdue payments.

This can have the ultimate impact of transferring liquidity pressure from insolvent companies to suppliers and creditors and enhancing credit risk. Suppliers will require becoming more attentive with their trading counterparties and considering regulating their transaction terms to address the risk.

Tax Payments and Enforcement

On 22 March 2020, the Federal Government of Australia declared that the ATO will come up with personalized solutions for businesses that struggle due to COVID-19. This includes temporary reduction of deferrals, and payments withstanding enforcement actions that include Director Penalty Notices.

Though it is not mentioned in the Coronavirus Economic Response Package Omnibus Act 2020, but the ATO has dispensed a media release with more details. Dedicated restructuring, insolvency, and turnaround team will constantly review the Federal Government of Australian in response to COVID-19.


All these changes are made by the government with the sole intent to prevent unnecessary bankruptcies and insolvencies to business amid the COVID-19 epidemic.

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