New bankruptcy laws could help SMEs

Proposed changes to Australia's bankruptcy laws have received support from the Council of Small Business of Australia (COSBOA).

New laws may help when companies like SkyAirWorld go down.



COSBOA has affirmed support for the Bankruptcy Legislation Amendment Bill 2009 which will ultimately improve the position for many small businesses that experience difficulties recovering small consumer debts.

Statistics have shown that where debt agreements or repayment plans can be negotiated, returns to creditors are on average much better than those achieved through bankruptcy proceedings.

"Businesses recover consumer debts at a rate of 70c in the dollar if people are not declared bankrupt, as opposed to just 2c in the dollar if bankruptcy takes place,"

COSBOA CEO Jaye Radisich said.

"The benefit of increasing the threshold far outweighs the downside risk where some people will inevitably run up bills with many creditors before one gets big enough for action to be commenced.

"It is much more important to legislate to support the majority of people who do the right thing most of the time, instead of second-guessing the actions of the lowest common denominator."

Ms Radisich said an overhaul of the Bankruptcy Act was long overdue, and congratulated the Attorney General Robert McClelland for taking action.

"The priority for small business is the ability to efficiently and effectively collect money that is legitimately owed. To that extent, proposed reforms increasing thresholds and providing a greater opportunity to negotiate the repayment of debts, is likely to result in better outcomes for Australian small business.

"An increase in the bankruptcy threshold from $2000 to $10000 could cause some nervousness among small business owners with small debts to recover - but the best chance of repayment results if bankruptcy is not declared," Ms Radisich said.

"The last thing small businesses need is a fire sale of assets and a liquidator taking a big cut before any creditor gets anything."

The amendments also include an increase in the time allowed for a defaulter to organise matters.

"It makes much more sense to allow 28 days rather than seven days for a defaulter to get their house in order before bankruptcy proceedings commence."

Ms Radisich said other provisions in the Act aimed at streamlining the process are overdue.


Contact Us


PO Box 2144