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COVID-19 insolvency law is to help you get through this crisis.
COVID-19 Insolvency Law
What happens if you or your clients can’t pay your creditors anymore during this ongoing COVID-19 crisis? When do you need to worry about insolvent trading? Or what happens on the other side when debtors stop paying you or your clients because they are still in lockdown? How will COVID-19 insolvency law get you out of this hole?
Ben Sewell of Sewell & Kettle in Sydney is an insolvency lawyer and so perfect to ask for advice.
Here is what we learned but please listen in as Ben explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Australia’s COVID-19 insolvency law is to help you survive. But you are under time pressure. You need to get out of this before 31 December 2020. The original deadline was 24 September 2020, but this was extended on 6 September to New Year’s Eve.
‘Old’ Rules
Before COVID-19 directors were personally liable for insolvent trading. Creditors could issue statutory demands for debts from $2,000 and require a response within 21 days.
‘New’ Rules
Now – during the COVID-19 crisis – Australia put all debts on ice – until 31 December 2020. There is a ‘temporary safe harbour’ from insolvent trading per s588GAAA of the Corporations Act 2001.
Until 31 December, directors don’t need to worry about insolvent trading. Creditors can only issue statutory demands from $20,000 upwards and the response period is 6 months. Individual bankruptcy rules mirror these new rules.
And tenants – be they commercial or residential – are protected from eviction.
All Temporary
But all this is only temporary. It is a temporary insolvency reform. After the 31 December we go back to the old rules. Unless we do a proper reform as the UK did.
On 1 January 2021, we go back to the usual regime of holding directors personally liable for insolvent trading and creditor’s statutory demands from $2,000 onwards with a response time of 21 days.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 16 March 2021
Tax Talks spoke to Ben Sewell - Principal at Sewell & Kettle - for more details.
