The new rules announced today by Australian Small Business and Family Enterprise Ombudsman Kate Carnell will be aiming at making it easier for small businesses - including developers and property agents, to restructure or wind up.

These new rules are in line with the recommendations outlined in the Insolvency Practices Inquiry final report handed down by the Ombudsman in July this year.  

“It’s clear the Federal Government has heard our concerns that current insolvency practices do not work for small and family businesses,” Ms Carnell says.

“Our July report found that in many cases, small businesses were not getting the chance to turn their business around and instead finding themselves on an express train to winding up with zero control over the process.

“The changes announced today by Treasurer Josh Frydenberg will go a long way to fixing that problem,” Ms Carnell said.

At a Glance:

• New regulations reduce the threat of creditors taking action against a small business - including developers and property agents.
• The government recognises the COVID crisis has driven many small businesses to the brink.
• Push for subsidy for businesses wanting to seek tailored financial advise. 

“The reforms will allow small businesses to restructure their debts while remaining in control of their business and for those businesses that sadly do need to wind up, the liquidation process will be changed to make it quicker and easier.

“We also welcome protections for small businesses that want to restructure, but are unable to get immediate access to an insolvency practitioner," Ms Carnell said.

Deloitte Access Economics modelling estimates about 240,000 small businesses are at risk of failure.

“This highlights the need for small businesses to sit down with their trusted financial adviser for a viability assessment. Unfortunately a measure to address this critical first step was missing from today’s announcement.

“That’s why my office continues to recommend the establishment of a small business viability program, where small business owners facing financial stress can obtain a voucher valued up to $5,000 to access tailored advice on the state of their business.

“We know the sooner a small business owner experiencing financial stress seeks assistance from an accredited professional, the better the outcome.

“Crucially, these measures give otherwise viable small businesses more time to recover, preventing a wave of unnecessary insolvencies,” Ms Carnell said.    

Today’s announcement will support the Federal Government’s temporary extension of insolvency and bankruptcy protections to 31 December 2020.

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