Katie Allen (Higgins, Liberal Party) Share this | Hansard source

I rise to support the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020—reforms that will be the most significant in our nation's insolvency framework for three decades. These are reforms that are imperative for small business who have faced financial stress this year due to the COVID pandemic. These reforms complement the Morrison government's JobMaker plan to ensure Australia emerges from the pandemic stronger, more resilient and competitive in our global economy.

Since the beginning of COVID, the Australian government has provided unprecedented levels of economic support for families and for the 27,000 small businesses in my electorate of Higgins. This support has included a range of economic measures. Tax relief measures of up to $2,745 have already passed parliament. Temporary tax incentives will allow 29,000 businesses in Higgins to write off the full value of any eligible asset they purchase to support new investment and, importantly, increase business cashflow. We've also supported the JobKeeper payments, which have supported 8,600 businesses in Higgins, to keep employees connected to their employers. The cashflow boost has also helped 6,300 small and medium businesses provide payments to help them stay afloat.

This bill forms part of the next phase of our economic recovery plan for small businesses. We need to keep small businesses in business so that Australia can stay in business. The Morrison government's reforms will help small businesses like those in my electorate of Higgins, many of which have had to incur significant debt. And we need to help make sure they can restructure and survive the devastating impacts of COVID.

In 2015, the Productivity Commission reported that almost 60 per cent of companies that enter voluntary administration are deregistered within three years. Accordingly, the new restructuring process that forms part of this bill is aimed at enhancing the rate of successful restructuring whilst providing a clear pathway for distressed small businesses that historically would never have entered voluntary administration due to the costs and the loss of control associated with this process. Where restructure is not possible, businesses will be supported to wind up faster, enabling greater returns for creditors and for employees to be paid fairly. These changes will introduce new processes suitable for small businesses from 1 January next year, reducing the complexity, time and cost burdens for small businesses. Our reforms will cover roughly 76 per cent of businesses subject to insolvencies today, 98 per cent of which have fewer than 20 employees.

Our insolvency system is facing challenges. There is an ever-increasing number of small businesses that are now financially distressed due to the severity of the COVID crisis. This can be seen very clearly in my home state of Victoria after very long and deep lockdowns that unfortunately had to be undertaken due to the failings of the state government with regard to hotel quarantining and contact tracing. The one-size-fits-all approach, which imposes unfair duties and obligations on business regardless of their size and administration, is no longer suitable; the current requirements are more suited to large, complex company insolvencies. That is why this bill is so important—so small businesses can prevent prolonged distress and begin the process of engaging with the insolvency system early if needs be. I've spoken to so many small businesses in Higgins and I know that what they want is simplicity and flexibility.

The reforms draw upon key features from chapter 11 of the Bankruptcy Code in the United States, which helps small businesses restructure and survive the economic impact of COVID. It is critical that our economy begins to recover and that businesses have flexibility to either restructure or wind down their operations in an orderly manner. Key elements of the reform in this bill include the introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million. We're moving from an inflexible, one-size-fits-all creditor-in-possession model to a more flexible debtor-in-possession model. This will allow small businesses to restructure their existing debts and continue trading under the control of their owners who know the business best. Accelerating the period to 20 days for the development of a restructuring plan by a small business restructuring practitioner, followed by 15 business days for creditors to vote on the plan, is another reform that will be very helpful to the sector. A new and simplified liquidation pathway for small businesses to allow faster and lower-cost liquidation is another measure that will be helpful to this area. Complementary measures to ensure the insolvency sector can respond effectively, both in the short and long term, to increased demand and to meet the needs of small businesses is one thing that we've heard about from the sector with regard to how to deal with the financial stresses that they are facing.

Our government understands that it will take time for practitioners to familiarise themselves with the new processes and to register as a small business restructuring practitioner. This will mean that not all small businesses will be able to access the process immediately on 1 January 2021. To address this transitional issue, an eligible small business will be able to declare to its creditors, through ASIC's published notices website, its intention to access the restructuring process. Our government is preparing to support the expected increase in the number of companies being put into external administration as the temporary relief measures expire at the end of December. The reforms in this bill will help those businesses to successfully get to the other side of the crisis. It is imperative we support them through this very tough and challenging time. I know the measures that we've announced to date have had a positive impact; they've allowed businesses to weather the storm. What we will do now is help them to move past the storm. Importantly, there are safeguards which will be implemented to prevent the process being used to facilitate corporate misconduct such as illegal phoenix activity. Phoenix activity is whereby a company is liquidated or abandoned to avoid paying its debt and a new company is then started to continue the same business activities without those debts. Obviously, that is something we wish to avoid as a government. These provisions include a prohibition on related creditors from voting on a restructuring plan, a bar on the same company directors using the same process more than once within a prescribed period, which is proposed to be seven years, and the power for a practitioner to stop the process where misconduct is identified.

Our government has been on the front foot from day one of this global pandemic. We've supported everyday Australians and small businesses to get to the other side of this crisis. On 22 March, our government announced temporary measures to help financially distressed businesses through JobKeeper and JobSeeker. I've never met a person who hasn't seen them as incredibly important economic measures, and it's broadly understood by the Australian public that these were very necessary steps to take. On 7 September, we announced a further extension of these support measures, which I know businesses in my community have greatly appreciated and utilised. The reforms in this bill will reposition our insolvency system to reduce costs for small businesses and to reduce the time they spend during that process. Ultimately, this will lead to greater economic resilience.

We know small businesses are the lifeblood of our economy. We also know that this has been an unprecedented crisis. The Australian public knows we have their back and the Australian public knows that we're responsible when it comes to economic measures. I commend this bill to the House.

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