On the 25th of March 2020 the Coronavirus Economic Response Package Omnibus Act 2020 came into effect and provided several temporary relief measures for directors.
It temporarily suspended the insolvent trading laws and it also revised the Creditors Statutory demand regime.
Insolvent Trading
Company directors will not be personally liable for any insolvent period between the period 25 March 2020 to 25 September 2020. If you would like to learn more about changes to director’s personal liability during COVID-19 pandemic then please click here
However, it is critical to be aware that these temporary COVID-19 relief measures to insolvent trading, will not affect other duties owed by a company director nor protect you from certain types of debts, such as stated below:
- PAYG, GST and Employee Superannuation debts
Directors may still be held personally liable for PAYG, GST and unpaid Employee Superannuation and certain other withholding tax debts if your company fails to lodge its Business Activity Statement and Superannuation Guarantee Statement on time. Directors became personally liability for GST from the 1st of April 2020 as a result of the new legislation known as the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019. This new legislation has not been suspended through the COVID-19 pandemic, like the insolvent trading laws.
- Debts through Personal Guarantees
Directors still be held personally liable for any debt incurred where a personal guarantee has been provided to the creditor. Again, the suspension of the insolvent trading laws will not assist directors where a personal guarantee has been provided.
Creditors Statutory demand
If you have received or you do receive a Creditors Statutory demand between 25 March 2020 and 26 September 2020, you will have six months to deal with it, rather than the usual 21 day period. Furthermore, during this above mentioned period, a creditor cannot issue a Creditors Statutory demand unless the debt is $20,000 or more. This statutory minimum has been increased from $2,000 during the COVID-19 pandemic period.
We recognise that these are uncertain and challenging times for your business. If you would like more information on temporary relief measures and you are worried about your personally liability for company debts, then please call to speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.