Insolvency reforms in place for small business as of January 1, 2021

If you’re a small business owner, you should be aware that the Australian Government has changed its insolvency framework, effective as of January 1, 2021. These reforms were brought in as a response to COVID-19 and the economic effects of the pandemic.

In order to assist small businesses in their survival through this challenging economic time, the changes allow small business owners to restructure more effectively. If a restructure is not possible, the reformed framework also allows the business to ‘wind up’ their operations quickly, which, in turn, means better returns are possible for staff and suppliers owed by the company.

The newly updated insolvency framework includes two new processes, which the ATO defines as a “simplified liquidation framework” and a “small business restructuring plan.” Both of these new processes are available to any incorporated Australian business with liabilities of under $1 million. Also important to note is the business’s requirement to pay all due entitlements to staff, including superannuation. Tax filings must also be current and updated with the ATO.

There’s no denying the profound impact that COVID-19 has inflicted on the economic landscape, and small business owners have borne a large portion of this weight through 2020. If your business is facing insolvency, these new reforms may prove beneficial for your financial resolution.

Of course, insolvency proceedings are both a complex and emotionally charged situation for any business owner. It may be advantageous to consult a professional for advice or guidance through this transition.

How can Halkin Business Partners help?

Our business consultants work closely with third party practitioners who can manage the process from start to end. At Halkin Business Partners we stand with you throughout the process and help guide you with the necessary support. Reach out for a consultation on how best to approach this process.