REFORMS TO SUPPORT SMALL BUSINESS RECOVERY IN THE RIVERINA AND CENTRAL WEST
The Federal Government’s reforms of Australia’s insolvency framework will help keep businesses open and residents in jobs throughout the Riverina and Central West.
Riverina MP and Deputy Prime Minister Michael McCormack said the reforms were the most significant undertaken in the past 30 years.
“These reforms are important as they will provide more support to businesses in the Riverina and Central West which have been adversely affected by the economic downturn caused by the COVID-19 pandemic,” Mr McCormack said.
“More support for businesses means more jobs available for workers.
“The Federal Government has always stood by the engine room of our economy – small and family businesses – and we are doing all we can to ensure these businesses are supported so they can survive and thrive on the other side of this crisis.”
The reforms, which draw on key features from Chapter 11 of the Bankruptcy Code in the United States, will help more small businesses restructure and survive the economic impact of COVID-19. As the economy continues to recover, it will be critical that distressed businesses have the necessary flexibility to either restructure or to wind down their operations in an orderly manner.
The reforms will assist incorporated businesses with less than $1m in liabilities covering around 76 per cent of Australian businesses subject to insolvencies today, 98 per cent of which have less than 20 employees.
Together, these measures will reposition our insolvency system to reduce costs for small businesses, reduce the time they spend during the insolvency process, ensure greater economic dynamism and ultimately help more local businesses get to the other side of the crisis.
Earlier this year, the Morrison-McCormack Government announced temporary regulatory measures to help financially distressed businesses get to the other side of COVID-19. On 7 September 2020 the Government announced a further extension of this relief to 31 December 2020.
The new processes will be available for small businesses from 1 January 2021. More information can be found at: https://www.michaelmccormack.com.au/s/Insolvency-Reforms-fact-sheet.pdf
On top of this significant announcement, the Federal Government is also simplifying access to credit for consumers and small businesses.
As part of the Federal Government’s economic recovery plan, we are reducing the cost and time it takes consumers and businesses to access credit.
Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs.
What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers.
The Government will simplify the system by moving away from a “one-size-fits-all” approach while at the same time strengthening consumer protections for those in need.
Mr McCormack said these announcements were about providing the frameworks for businesses to navigate through uncharted economic headwinds caused by the coronavirus pandemic.
“We want businesses to get to the other side of this downturn in the best way possible,” Mr McCormack said.
“We want businesses to be able to invest and back themselves to grow and create more jobs.
“We know the road back will be a challenging one, but the Liberals and Nationals’ Government will be there to assist where it can for every step of our nation’s journey – we are all in this together and we will get through it together.”
Key elements of the consumer credit reforms include:
• Removing responsible lending obligations from the National Consumer Credit Protection Act 2009, with the exception of small amount credit contracts (SACCs) and consumer leases where heightened obligations will be introduced.
• Ensuring that authorised deposit-taking institutions (ADIs) will continue to comply with APRA’s lending standards requiring sound credit assessment and approval criteria.
• Adopting key elements of APRA’s ADI lending standards and applying them to non-ADIs.
• Protecting consumers from the predatory practices of debt management firms by requiring them to hold an Australian Credit Licence when they are paid to represent consumers in disputes with financial institutions.
• Allowing lenders to rely on the information provided by borrowers, replacing the current practice of “lender beware” with a “borrower responsibility” principle.
• Removing the ambiguity regarding the application of consumer lending laws to small business lending.
The Government will consult publicly with stakeholders before finalising any legislation required to implement the reforms.
Further information on the measures can be found at: https://www.michaelmccormack.com.au/s/Consumer-credit-reforms-fact-sheet.pdf
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