What changed in the business environment?
From Senate inquiries to proposed legislation, below is a summary of some of the major changes that happened in the business environment in 2019.
January: Senate Inquiry into Credit and financial services targeted at Australians at risk of financial hardship
The inquiry focused on payday loans, consumer leases and buy-now-pay-later providers and how these arrangements are influencing consumer spending habits.
Some concern centred around the financial safety of consumers who may be accumulating debt by utilising these payment methods. While Australia’s two largest buy-now-pay-later providers, Afterpay and Zip Co. appeared before the Senate, neither of the providers claimed to have taken legal action in pursuit of outstanding debts. Perhaps these financial institutions will more frequently feature as creditors in bankrupt estates?
The Inquiry Report published on 20 February made 20 recommendations. These included more funding for regulators and a regulatory regime for buy-now-pay-later schemes.
Related article: The current buy-now-pay-later marketplace
April: Superannuation Guarantee Charge debts
On 1 March 2019 the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 received royal assent. The effect of this, among other changes, resulted in the removal of the three-month grace period relating to superannuation guarantee charge (SGC) debts.
As a result, from 1 April 2019 SGC liabilities become personal liabilities of the director by operation of law if they remain unreported and unpaid on the due date for an SGC statement.
For most companies, superannuation contributions are payable on the 28th day of the month after the end of the quarter. An SGC statement is due on the 28th day of the following month.
Related article: Director penalty notice change to superannuation rules
June: Amerind decision
On 19 June 2019, the long-awaited High Court decision in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 (more commonly known as the Amerind case), was handed down. The High Court unanimously held that a corporate trustee’s proprietary interest in trust assets (which is created by the trustee’s right of indemnity) is “property of the company” for the purposes of section 433 of the Corporations Act 2001.
Pursuant to section 433, receivers must pay the proceeds from any circulating security assets realised to priority employee creditors before making any distribution to the secured creditor.
The decision finally lays to rest the ambiguity and previously discordant authorities in relation to the application of the statutory priorities set out in the Corporations Act to the distribution of trust assets where the employing entity is a corporate trustee.
Related article: The Amerind High Court decision
July: Bankruptcy Amendment (Enterprise Incentives) Bill 2017 & The Combatting Illegal Phoenixing Bill
The controversial Bankruptcy Amendment (Enterprise Incentives) Bill 2017 officially lapsed on 1 July 2019 and as such will no longer be proceeding. If the Bill was passed, it would have had the effect of amending the Bankruptcy Act 1966, resulting in reducing the default period of bankruptcy from three years to one year.
Considering the significant impact of declaring bankruptcy or otherwise becoming bankrupt on a bankrupt’s creditors, and the larger flow on effect to the economy, some may be pleased to see that this Bill has lapsed.
In contrast, the federal government reintroduced its Combatting Illegal Phoenixing Bill to parliament in July 2019. The proposed legislation provides new criminal offences and civil penalty provisions targeting illegal asset stripping activity, including penalties of up to 10 years’ imprisonment for criminal offences. As at the date of this article, the Bill has passed the lower house and is awaiting passage through the Senate.
Related article: Combatting Illegal Phoenixing Bill reintroduced into parliament
October: New ATO power to refer tax debts to Credit Reporting Bureaus
On 22 October 2019, the government passed law that allows the Australian Taxation Office (ATO) to disclose business tax debt information to registered credit reporting bureaus. The ATO is now able to disclose tax debt information of a business (with a non-excluded Australian Business Number) to a credit reporting bureau if it has tax debts of at least $100,000, the debts are overdue by more than 90 days and the business is not effectively engaging with the ATO to manage its tax debt (and not subject to a specific “proposed reporting” complaint). The law received royal assent on 28 October 2019.
Related article: Royal assent for ATO to disclose business tax debt information
All in all, it has been an interesting and thought-provoking year with several key changes. We look forward to seeing the impacts these developments have on the insolvency industry and broader business sector in 2020.
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