ARITA makes key contribution to national personal insolvency roundtable


The Australian Restructuring Insolvency and Turnaround Association was one of 24 organisations invited to contribute to a roundtable on personal insolvency reform convened by Attorney-General the Hon Mark Dreyfus KC earlier this month.

The roundtable was held to give practitioners and groups representing both creditor and debtor interests the opportunity to engage directly with Government to discuss the issues in the current system, areas needing reform and the longer-term strategic challenges.

ARITA CEO John Winter attended the roundtable on 2 March, calling it a “constructive and conciliatory opportunity to discuss the issues and key reforms needed in personal insolvency, particularly given the broad spectrum of organisations there”.

“This is a critical and welcome step by the Attorney-General towards a more holistic review of our insolvency regime and comes alongside the excellent and bi-partisan work being done by the Parliamentary Joint Committee on Corporations and Financial Services inquiry into corporate insolvency laws, in which ARITA has been an active participant,” Winter said.

“Importantly, the Attorney-General committed to positive reform of bankruptcy law as soon as possible. He also acknowledged the push for ‘root and branch’ reform in the bigger picture.”

Key issues identified by participants as priority areas for government analysis included:

Increasing the bankruptcy threshold value from $10,000

“This was driven by the notion that chasing individuals for low level debts carries significant risks and the potential for abuse. From ARITA’s perspective, pursuing bankruptcies for amounts under $20,000 seems uncommercial and so we accept there is the potential for common ground,” Winter said.

Options for a shorter discharge period from bankruptcy for some bankrupts

“ARITA understands that the majority of our members who work in bankruptcy oppose a default one-year bankruptcy for the issues it causes with complex bankruptcies and uncooperative bankrupts. We do believe, though, that simple bankruptcies where the bankrupt works positively and cooperatively with their trustee should be able to be given an early exit to rehabilitate themselves financially.

Options for easier annulment for inappropriate bankruptcies

“Financial counsellors and rights groups expressed significant concern about bankruptcies that had been imposed on individuals unfairly, such as in cases of domestic/financial abuse. We are aware of many trustees who’ve been frustrated with the limited options available in cases like this and so we support a review of mechanisms in this area.

Increasing the period for a debtor to respond to a bankruptcy notice from 21 days

“Again, raised by financial counsellors and rights groups, there was a concern that many debtors, especially those with poor financial or general literacy, struggle to get appropriate advice in 21 days. With little downside to allowing an increase in the notice period, ARITA believes we can have positive discussions about changes here.

Options to identify and scope measures to address poor practice

“The unregulated ‘pre-insolvency’ advice market is an area ARITA has raised as a concern for some time, following a 2019 ARITA member survey that found almost half of registered liquidators and trustees who responded had seen an increase in activity from pre-insolvency advisors in the previous two years.

“These unlicensed advisors are not registered liquidators or trustees, not lawyers or tax practitioners, and they are unsupervised by ASIC, AFSA or professional bodies like ARITA.

“ARITA fully supports the proposals coming out of the roundtable to address this issue, including increasing information gathering powers for regulators and the creation of a cross-regulator taskforce,” Winter said.

“We also, again, raised the significant problems being experienced by trustees since the ATO’s changed stance on CGT in bankruptcy. We now understand that discussions are progressing within the relevant departments arising from our submissions.

“ARITA looks forward to continuing to work with the Attorney-General on reforms for personal bankruptcy and the Parliamentary Joint Committee on corporate insolvency to help bring about the simplification and reform of Australia’s insolvency regime,” Winter said.