25 March 2020
Changes to insolvency rules offers small businesses some breathing space
The ‘I’ word. Insolvency is something we don’t want to talk about. Not yet. But we need to.
In these extraordinary times, we know there are many small businesses out there, wondering if they can keep their doors open.
Directors need to be aware of, and access, the support offered by government to meet the tax obligations of their business.
As the delayed lodgement periods for Business Activity Statements for those affected by bushfires become due, and the various credits for PAYG Withholding available, make sure you speak with your accountant to review BAS already lodged and compile those due shortly.
Even with these measures, many small businesses may find that they cannot meet all their bills when they fall due.
Normally this means the business is insolvent and the directors should consider winding it up.
Under new insolvency rules announced by the federal government, directors will not be held personally responsible for any debts incurred in the ordinary course of business during the next 6 months.
This supports small businesses to keep trading throughout this crisis in circumstances where they believe they can get the business back on track when things return to normal.
In addition, extra time has been given to negotiate extended payment terms or reduced payments with the creditors of the business.
Creditors cannot chase overdue payments, that is, issue a statutory demand unless the debt owed is $20,000 or greater, increased from $2,000. If you do receive such a demand, you now have 6 months to satisfy the demand or apply to a court to have it set aside, increased from 21 days.
The coming weeks and months are going to be enormously challenging but rest assured my office is advocating for more support measures to help small business survive this crisis.