Thresholds

PERSONAL INSOLVENCY

The following information outlines both the monetary thresholds and time limits that apply in relevant insolvency practices.

COVID-19 government measures

As part of the government’s economic response to COVID-19 it provides temporary relief for financially distressed businesses. It aims to provide a safety net by reducing the threat of actions against businesses and attempting to provide confidence to directors to continue to trade during this difficult time.

To create that safety net, the government is temporarily changing elements of how creditor actions commence and director’s exposure to personal liability in an insolvency scenario, which include:

  • 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 will be in place temporarily for six months.

These legislative amendments received royal assent on 24 March 2020 and will be in place for six months—ending on 25 September 2020.

* 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 – $3,708.00

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
  • $8,000.00 – Motor Vehicle Allowance
  • $5,882.00 – 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 $4,550.00. 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 $5,926.80 (inc.GST).

Bankruptcy Notices

Minimum amount for issuance of a Bankruptcy Notice: $5,000.00

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

As part of the government’s economic response to COVID-19 it provides temporary relief for financially distressed businesses. It aims to provide a safety net by reducing the threat of actions against businesses and attempting to provide confidence to directors to continue to trade during this difficult time.

To create that safety net, the government is temporarily changing elements of how creditor actions commence and director’s exposure to personal liability in an insolvency scenario, which include:

  • 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 will be in place temporarily for six months.

These legislative amendments received royal assent on 24 March 2020 and will be in place for six months—ending on 25 September 2020.

* 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

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