PERSONAL INSOLVENCY
The following information outlines both the monetary thresholds and time limits that apply in relevant insolvency practices.
COVID-19 government measures
The government’s COVID-19 economic response provided temporary relief for financially distressed businesses. Creditors’ actions and directors’ exposure to personal liability in an insolvency scenario were amended in the following ways:
- Statutory demands against companies: threshold amount increased from $2,000 to $20,000 and time to respond extended from 21 days to six months.
- Bankruptcy notice against individuals: threshold amount increased from $5,000 to $20,000 and time to respond extended from 21 days to six months. Moratorium period for a ‘declaration of intention’ to present a debtor’s petition extended from 21 days to six months.
- Directors’ personal liability for insolvent trading paused for six months*.
The above measures have now lapsed. From 1 January 2021, the following rules now apply:
- Statutory demands against companies: threshold amount is $2,000 and time to respond is 21 days.
- Bankruptcy notice against individuals: threshold amount is now $10,000 and time to respond is 21 days.
- Moratorium period for a ‘declaration of intention’ to present a debtor’s petition is 21 days.
As a new measure, a company can get temporary restructuring relief during 1 January 2021 to 31 March 2021 if the company directors:
- make the required declaration about the company’s eligibility for temporary restructuring relief; and
- publish notice of that declaration on ASIC’s Published Notices website.
The relief measures include:
- increasing creditor’s statutory demands to $20,000
- increasing company response time to a statutory demand to 6 months
- giving temporary safe harbour from director’s personal liability for insolvent trading for debts incurred (in the ordinary course of business) before appointing an administrator or liquidator during the safe harbour protection period.
* Egregious cases of dishonesty and fraud will still be subject to criminal penalties.
Income Contribution Threshold
Income Thresholds before Income Contributions become Payable (after tax & s139N deductions):
- $59,031.70 – No Dependants
- $69,657.41 – 1 Dependant
- $74,970.26 – 2 Dependants
- $77,921.84 – 3 Dependants
- $79,102.48 – 4 Dependants
- $80,283.11- 5+ Dependants
- Maximum Dependant Income – $3,741.00
Part IX Thresholds
To be eligible to propose a Part IX Agreement:
- $88,547.55 Income (after tax)
- $236,126.80 – Available Assets (after secured debts)
- $118,063.40 – Unsecured Creditors
Asset Allowances
- $3,800.00 – Tools of Trade allowance
- $8,100.00 – Motor Vehicle Allowance
- $5,934.00 – Obtaining Credit without Disclosure
General Dividends
Notice to be given to creditors to lodge Proofs of Debt:
at least 21 days before declaration
Minimum time after declaration before payment of dividend:
No time Limit. The dividend may be paid immediately after the end of the lodgement period.
Minimum Dividend:
Bankruptcy trustees are not required to pay a dividend under $25.00 to any creditor.
Priority Employee Entitlement Threshold
Priority Claim for Employee:
A maximum priority dividend for wages and superannuation of $4,600.00. Any claim for wages and superannuation above this amount is a non-priority debt.
Claims for annual leave & long service leave also have a priority.
Meeting Convening Periods
Notice period for bankruptcy meetings:
Reasonable notice of meeting
Deadline for Virtual Meetings:
Trustee to specify the end of voting
Holding Part X meeting:
within 25 business days from date of appointment
Holding change of trustee meeting:
At any time with 7 days notice of meeting
Streamlined Change of Trustee:
At any time with at least 10 days notice
Default Remuneration
The trustee has approval to draw default remuneration without approval to an amount of $5,388.00 (inc.GST).
Bankruptcy Notices
Minimum amount for issuance of a Bankruptcy Notice: $10,000.00
Compliance period: The debtor has 21 days to pay the debt or be deemed insolvent
Bankruptcy Act Offences
Concealment of property from Trustee:
section 263 – 1 to 5 years or $1,000
Creditor lodging false claims to vote:
section 263C – 6 months
Failure to Disclose Property to Trustee:
section 265 – 1 to 5 years
Failure of Person to Attend Interview with Trustee:
section 267D – 6 months
Bankrupt obtaining credit of more than Statutory limit without advising of bankruptcy:
section 269 – 3 years
Failure to keep proper Books and Records:
section 270 – 1 to 3 years
Bankrupt leaving Australia with intention of not returning:
section 272 – 3 to 5 years
CORPORATE INSOLVENCY
The following information outlines both the monetary thresholds and time limits that apply in relevant insolvency practices.
COVID-19 government measures
The government’s COVID-19 economic response provided temporary relief for financially distressed businesses. Creditors’ actions and directors’ exposure to personal liability in an insolvency scenario were amended in the following ways:
- Statutory demands against companies: threshold amount increased from $2,000 to $20,000 and time to respond extended from 21 days to six months.
- Bankruptcy notice against individuals: threshold amount increased from $5,000 to $20,000 and time to respond extended from 21 days to six months. Moratorium period for a ‘declaration of intention’ to present a debtor’s petition extended from 21 days to six months.
- Directors’ personal liability for insolvent trading paused for six months*.
The above measures have now lapsed. From 1 January 2021, the following rules now apply:
- Statutory demands against companies: threshold amount is $2,000 and time to respond is 21 days.
- Bankruptcy notice against individuals: threshold amount is now $10,000 and time to respond is 21 days.
- Moratorium period for a ‘declaration of intention’ to present a debtor’s petition is 21 days.
As a new measure, a company can get temporary restructuring relief during 1 January 2021 to 31 March 2021 if the company directors:
- make the required declaration about the company’s eligibility for temporary restructuring relief; and
- publish notice of that declaration on ASIC’s Published Notices website.
The relief measures include:
- increasing creditor’s statutory demands to $20,000
- increasing company response time to a statutory demand to 6 months
- giving temporary safe harbour from director’s personal liability for insolvent trading for debts incurred (in the ordinary course of business) before appointing an administrator or liquidator during the safe harbour protection period.
* Egregious cases of dishonesty and fraud will still be subject to criminal penalties.
Meeting Periods
Holding first voluntary administration meeting:
within 8 business days after the administration begins.
Convening period to call second voluntary administration meeting:
20 business days from first business day after appointment.
Extension to convening period:
If the day after the administration begins is in December or is less than 25 business days before Good Friday, 25 business days beginning on that day, or if not next business day.
Holding Second voluntary administration meeting:
within 5 business days before or after the end of the convening period.
Holding initial creditors voluntary liquidation meeting:
within 11 days after appointment allowing for 7 days notice.
Holding other liquidation meetings:
At any time during appointment with 10 business days notice.
Final Meetings in voluntary liquidations:
At end of appointment with 1 month notice.
Priority Employee Entitlement Thresholds
Excluded Employees:
Excluded employees can only receive $2,000 in relation to wages and $1,500 in relation to leave entitlements in priority to non-employee creditors. They will not receive a priority dividend for other entitlements.
Non-excluded employee:
No Limit. Non-excluded employees (not related to the directors) can receive their full entitlements.
Default Remuneration
The trustee has approval to draw default remuneration without approval to an amount of $5,615.50 (inc.GST).
General Dividends
Notice to be given to creditors to lodge Proofs of Debt:
at least 21 days before declaration
Minimum time after declaration before payment of dividend:
No time Limit. The dividend may be paid immediately after the end of the lodgement period.
Minimum Dividend:
Liquidators are not required to pay a dividend under $25.00 to any creditor.
Statutory Demands
Minimum amount for the issuance of a Statutory notice:
$2,000.
Compliance period: The debtor has 21 days to pay the debt or be deemed insolvent.
Insolvency Related Offences
Non-Disclosure or Misrepresentation section 590(1) – $10,000 or 2 years or both
Knowingly Receiving property of company section 590(5) – $5,000 or 1 year or both
Frauds by Officers of company section 596 – $10,000 or 2 years or both
Falsification of company books and records section 1307 – $10,000 or 2 years or both
Providing False or Misleading statement section 1308 – $20,000 or 5 years or both