Insolvency changes to support people in small business
Changes to Australia’s insolvency system
The Australian Government has changed our insolvency system to give more support to people in small business. New processes came into effect on 1 January 2021, replacing the temporary debt relief measures introduced in March 2020.
The aim? To make insolvency processes simpler, less time consuming and less costly, and to allow more people to restructure their small businesses quickly at this time.
The changes include:
- a new ‘debtor in possession’ model that allows the business owner to keep trading and propose a debt restructuring plan
- a new, simplified liquidation pathway for small businesses to allow faster and lower-cost liquidation
- reduced investigative and reporting requirements for liquidators.
The fact sheet on insolvency reforms includes answers to questions you might have, definitions of key terms, a helpful case study and more information on how the new processes work.
Deciding whether to close your business
If you’re finding that your small business is no longer viable, you might need to consider closing your business. Making this decision isn’t easy, however, there are resources to help.
Before deciding, speak with your accountant or a business advisor as soon as you can to talk about your options and see if they can help you get back on track. It’s best to get advice as early as you can as more options will be available to you.
CPA Australia offers a practical guide on warning signs your business might be in trouble, which includes early and critical signs, resources that can help and actions you can take. The ATO offers a business viability assessment tool that you can also use to determine if your business is still financially viable.
In addition to these resources, you might want to consider getting advice from experienced mentors at the Small Business Mentoring Service or applying to take part in the Victorian Chamber of Commerce and Industry’s business recovery and resilience mentoring program.
Support in closing your business
If you have made the decision to close your business, access CPA Australia’s checklist for closing your business in Australia. This easy-to-navigate resource sets out the actions business owners need to consider when closing their business, including:
- key decisions that need to be made
- financial and leasing considerations
- communicating the closure
- tax and legal obligations
- looking after yourself and your staff
- tying up loose ends.
Looking after your wellbeing
Closing a business can be a very challenging and stressful experience for a small business owner. If you are feeling stressed, worried or overwhelmed, I encourage you to call the Partners in Wellbeing helpline on 1300 375 330 for free and confidential mental health support and financial counselling.