The temporary relief to insolvency laws and roll out of stimulus measures to offset the economic impact of COVID-19 has had a drastic impact on the number of insolvencies and winding up applications to the Australian Tax Office (ATO).
Attributed to ATO adopting a sympathetic approach with the COVID-19 pandemic, opting to focus on business support measures rather than recovery procedures, the ATO did not file any winding up applications in July or August 2020. The effect of the insolvency laws has been consistent since the wake of the pandemic, with April 2020 only recording a mere seven court applications.
When comparing July to August 2020 and July to August 2019, winding up applications are down by 89% and court liquidations are down 74%. This similar trend is also seen with Voluntary Administration and Voluntary Liquidations, down 62% and 37% respectively.
Whilst the number of winding up applications have hit an all-time low, experts warn that the COVID-19 insolvency relief measures may cause a domino effect of business shutdowns after the legislation is scheduled to end on September 25th. Whilst the government has extended some economic relief measures, such as revamping the JobKeeper program to have it extended to March 2021, there is still debate as to whether it would be appropriate to extend the regulatory shield on insolvency laws beyond September 2020.
If you would like more information on the temporary relief measures put in place or what options are available to reduce financial distress to your company then please 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.