Is a Bankrupt’s money his/her own?

is-a-bankrupt-s-money-his-her-own
A question that is frequently asked by an individual that may be contemplating bankruptcy is what happens to the income they earn during bankruptcy. In short, the Bankruptcy Act 1966 (“the Act”) provides that the individual is assessed regarding the requirement to pay compulsory income contributions for each year of their bankruptcy. Given that the general term of bankruptcy presently is three (3) years, then typically the individual would be assessed for each year. Other discussions then flow from this question, in particular what are they able to do with monies after payment of any compulsory income contributions?

A bankrupt may be assessed by their bankruptcy trustee as being liable to make income contributions to his/her estate based on a formula in accordance with the provisions of the Act. To summarise, the level of income contributions is half (or 50%) of the difference between after-tax income and the bankrupt’s assessed threshold. The balance (being the remaining 50%) of after-acquired income is retained by the bankrupt.

What has not been clear is the scopeof after-acquired property (ie property acquired by the bankrupt after bankruptcy and before discharge) which vests in a trustee pursuant to Sections 58(1) and 116(1) of the Act. And does it include assets acquired by the bankrupt with afteracquired or exempt income?

For example, if a bankrupt acquired shares in a company (listed or private) with afteracquired income, do the shares vest in the Trustee, (ie do they become after-acquired property)?

The conflicting cases

A simple example such as this has been the subject of uncertainty until recently. In Rodway v White [2009] WASC 201 it was held that the shares were after-acquired property and thus vested in the trustee. This was the belief of practitioners, especially as other authorities were of the same view.

However, in the recent case of De Santis v Aravanis [2014] FCA 1234 it was held that any property acquired by a bankrupt with after-acquired income does not vest in the bankruptcy trustee. So the shares do not vest in the Trustee.

Who is right? Current law

In the more recent Federal Court of Appeal case of Di Cioccio v Official Trustee in Bankruptcy [2015] FCAFF 30 (Di Cioccio) it was held that the shares and other property do vest in the Trustee. Mind you, this ‘complex’ matter was decided on appeal.

So, we are now back to square one and trustees/creditors can smile and bankrupts are left scratching their heads. Why do I say this?

Is it fair?

Bankrupts reasonably argue that if it is exempt income then why can’t they deal with it as they please. Isn’t rehabilitation one of the main purposes of bankruptcy? We all makemistakes and bankrupts should be given an opportunity to get on with their lives and plan for the future by being allowed to save exempt income. Double dipping is not fair.

Unfortunately, Di Cioccio is the ‘current’ law and possibly the basis of needed law reform.

What about savings?

So can a bankrupt just save his/her income or spend on expenses but not on assets? As to spending, it is bizarre in that bankrupts can spend as much as they like on the high life as long as they don’t buy assets or possibly save too much.

In Re Gillies; Ex Parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571 it was held that accumulated non-contributable income/savings did not become afteracquired property.

However, in the recent decision of Di Cioccio it “appears” that the Federal Appeal Court held that such savings did vest in the trustee, subject to section 134(1)(ma) of the Act. This section of the Act indicates that a trustee may allow withdrawals which he/she thinks are just. The trustee is to act sensibly and fairly in this regard.

I say “appears” because Bankruptcy Trustees, Regulators and lawyers are currently examining this decision and its consequences. If ‘surplus’ savings do vest in a trustee, is this fair? I don’t believe so.

Conclusion

Di Cioccio is authority for Bankruptcy Trustees being entitled to assets acquired with exempt income. It may also be authority that ‘surplus’ savings are also vested in the trustee.

It would seem that further legislative guidance ought to be strongly considered because the uncertainty at the moment does not provide the clarity that stakeholders, principally the individual and creditors are looking for. Needless to say it is a complex area and individuals should ensure they get the right advice about what it means for them.

What impact does personal bankruptcy or other Insolvency proceedings have on individual’s credit rating?

good-credit

As a bankruptcy trustee I am often asked by individuals facing personal financial hardship what will happen to my credit rating if I formally declare myself bankrupt More importantly individuals are often concerned about their ability in future to borrow money for important things such as a house or a car.

The legal position is that the bankrupt is unable to borrow money over the prescribed limit (presently $5,409) without disclosing the fact that the individual is bankrupt. Clearly a lender will be cautious about making an advance in such circumstances. The position changes however once the individual is discharged from bankruptcy or even better if the bankruptcy is annulled. Once this takes place there is no longer any legal impediment to an individual borrowing money. In addition he or she is not under any legal obligation to disclose the bankruptcy. Of course lenders frequently request a disclosure of the past history of the individual which is a separate matter.

In addition the foregoing lenders will do a check with a Credit Reporting Body (CRB) on an individual’s history and of course the bankruptcy will appear. At present formal bankruptcy proceedings remain on individual’s credit record for seven years after the bankruptcy has been completed (notwithstanding the fact that most Bankruptcies are discharged after 3 years). This kind of credit referencing information simply augments other information obtained by lenders and has no legal bearing whatsoever on the credit arrangements. The information is merely to enable the lender to assess the likely risks in relation to the borrower.

It is important to note that a great deal of additional information is maintained by CRB’s on individuals. This information includes details of past credit applications, defaults, judgements and writs. It also now includes details of repayment history regarding consumer credit. Having regard to the other information recorded bankruptcy is often not the worst thing that can be reported about an individual in relation to the credit referencing.

Indeed credit referencing bodies report on “serious credit infringements” which generally speaking relate to individuals that have avoided being contacted by the creditors or commit fraud. In the worst case a “skip out” is recorded reflecting the fact that an individual has put themselves in a position where they can no longer be contacted by the creditors.

Where there has not been any “serious credit infringement” it is possible for individual to take action to repair his or her credit worthiness.

A “Certificate of Discharge of Bankruptcy” is an important document signed by a Bankruptcy Trustee indicating that an individual is now formally discharged from bankruptcy. An individual seeking to borrow money after discharge from bankruptcy will find this document extremely helpful in obtaining finance

In most cases the major banks will consider a Discharged Bankrupt for relatively straightforward loans such as housing loans providing the individual complies in all other respects (that is in relation to deposits and affordability). In some cases however an individual may have to go to second-tier lenders at least initially and be required to pay a higher interest rate until the credit referencing score has improved.

Individuals with an impaired credit report can take positive steps to improve the situation.The first step is to obtain a copy of the credit report and ensure that there are no errors or mistakes. Mistakes can and must be rectified. The second step is to ensure all future debts are paid on time. A handy hint here is to set up payment authorities for such things as utility bills and to ensure that other accounts are paid strictly on time. Over time expensive short-term finance such as credit cards and overdrafts can be refinanced into long-term loans with periodic payments. This improves the score and enables these loans to be refinanced again at competitive rates and conditions.

In summary just because an individual has had a chequered history so far as finances are concerned, even involving Personal Bankruptcy, a Debt Agreement or a Personal Insolvency Agreement it does not mean that things cannot be repaired over time.

Individuals who find themselves in too much debt should consider the benefits of filing for Bankruptcy. Myself or others at Jones Partners can advise and assist in this regard.

Will the Australian government’s “single touch payroll proposal” create more insolvencies?

The Australian government announced measures to cut red tape for business and to provide a simplified payroll system that would mandate or a “single touch payroll system”

The Australian Taxation Office (ATO) is currently conducting a consultation process in order to examine the consequences of this measure and has called for submissions from stakeholders.

Under “single touch payroll”, employers will be required to electronically report payroll and super information to the ATO (Australian Tax office) when employees are paid, using standard business reporting – enable software. This is different to the current situation where employee tax deducted from payroll is reported in the employers BAS and only forwarded to the ATO depending on the particular companies reporting requirements. Superannuation is only required to be forwarded 28 days from the end of each quarter. If the super deducted from employees pay is unremitted employers have three months to report the breach to the Australian taxation office.

The Institute of Chartered Accountants has been privy to the discussions behind this strategy and has shared some useful insights.

The “single touch payroll” proposal does appear to afford a considerable reduction in red tape and is therefore clearly very advantageous to business.

payroll proposal

This should make small businesses much more efficient and as a consequence reduce the likelihood companies going into liquidation or administration or directors facing personal bankruptcies

On the other hand there may be cash flow implications for small businesses in that they will be required to remit the employee deductions at the end of each pay period.create more insolvenciesIt is likely that this cash flow pressure will increase the numbers of company liquidations, administrations and receiverships due to the fact that company directors will be forced to approach insolvency practitioners at a much earlier time.

There is of course a very big advantage to the ATO that there will be an early warning where tax and superannuation are unremitted.

One of the biggest problems facing the economy so far as insolvent companies are concerned is that when a company is in financial difficulty and cash flow is tight it is too easy to use unremitted PAYG tax and super as working capital to fund the ailing business. (See Related Article Insolvency and the Tax Man Jekyll and Hyde)

The problem is compounded because the ATO appears to be somewhat inefficient in chasing up these outstanding debts. As a consequence the insolvent company is allowed to continue for a considerable time often incurring more debts and creating unfair competition in its industry environment.

In defence of the ATO it is frequently unaware of the liability because the employer has not lodged the appropriate documentation.

As a consequence so-called fraudulent Phoenix activity (See related Article Phoenix Fire Reignites) involving a succession of liquidated companies with a similar name, address and phone number employees and website—has become common.

The single touch payroll proposal is a practical way of solving this problem.

Call us or visit our website to see how our specialist team can help businesses facing financial pressure as a result of unremitted taxes and superannuation

Why is risk-taking and entrepreneurship important to the Australian economy?


Risk is essential to the business environment. Entrepreneurship relies on creativity and imagination but with every new endeavour comes risk. The usual paradigm is that there is a direct relationship between the level of risk and return or profit attributed to that activity.

The Jones Partners’ economic research project into small to medium business (SME) Insolvencies in the Australian economy looked at the impact of risk and risk-taking on entrepreneurship. The attached video excerpt tries to answer the question -why is risk-taking and entrepreneurship important to the Australian economy? And provides an interesting narrative commentary on this issue

Most new ventures carry with them an elevated level of risk. Furthermore it is the small to medium (SME) sector that carries most of the risk burden within the Australian economic environment. It is therefore no surprise that this sector necessarily has the highest levels of insolvencies. Company Liquidations and Administrations including Voluntary Administrations and Deeds of Company Arrangement are disproportionately represented in small to medium (SME) sector. This however should not be necessarily be seen in a negative light

If we accept the value of entrepreneurship and risk-taking to the Australian economy then we must accept the consequences in terms of potential business failure.

At the present time however there appears to be a much greater cloud on the horizon. Recent observations indicate that Australian small to medium (SME) sector business leaders are becoming increasingly risk averse. Moreover it is becoming apparent that consumers themselves are becoming more cautious. In relation to consumers in particular we are observing and increased conservatism in the use of consumer credit as a consequence (having regard to the fact the Personal Bankruptcies have a direct relationship to the volume of consumer credit) Bankruptcies are for the first time in a decade levelling off and there is some indication that they may be in decline. This is not as a result of a more favourable Australian economic environment but rather the reluctance of consumers to borrow money.

In relation to the business investment there is a similar level of conservatism. Banks are reporting difficulties in finding suitable prospects and there has even been some recent evidence that in relation to the public company sector corporations are adopting a more generous dividend policy and in some cases even returning significant amounts of capital to shareholders. In short the corporate sector is saying to investors “we can’t find enough investment opportunity to use your money”

Jones partners have embarked on an economic research project that will see an annual report on the state of the Australian economy with respect to the level of insolvencies. The initial report was launched in July 2014 and made a number of key observations in relation in particular to the small business sector of the market

One relevant, if not obvious, observation is that the level of insolvencies does have an inverse relationship to Australian economic activity however there appears to be an important complicating factor. The number of SME insolvencies also has a direct relationship to the overall number of small to medium (SME) sector businesses that exist in the economy. When the economic mood is one of caution and when investors are reluctant to take risks economic activity will slow. There will be fewer new ventures. As a consequence it is possible to observe a reduction in the SME insolvency numbers whilst at the same time economic activity is subdued

These Australian economic indicators are being further research is part of the Jones Partners Economic research project which is aimed at enlightening the professions and business leaders on the impact of insolvencies have on the broader economic environment.

Jones Partners is keenly interested in investigating these issues .Jones partners specialises in providing professional advice and practical solutions. We can advise on a range of solutions that assists companies in difficulty Including Voluntary Administration, Receivership and various forms of Liquidation. In relation to personal insolvencies Jones partners has 4 registered Bankruptcy Trustees who are extremely active in assisting individuals resolve their personal financial difficulties using various parts of the Bankruptcy Act including Part 10 (Personal Insolvency Agreements) and Annulments pursuant to section 73 Of the Bankruptcy Act.

The effect of the environmental movement on Insolvencies in Australia


There are three major contributors to Australian insolvency statistics

Obviously the overall health of the Australian Economy is important and this was clearly demonstrated in the Jones Partners Report on Insolvencies in the Australian Economy launched in July 2014. In that report it was clearly demonstrated that there is an inverse relationship between the level of GDP and the number of Insolvencies. This was more pronounced with respect to Company Liquidations, Voluntary Administrations and Receiverships than with Personal Bankruptcies.

It’s important however to realise that the management of individual businesses is more important. In fact the major reason for Australian company failures as articulated in a report by the ASIC is lack of strategic management. In fact of the top 4 reasons for Australian companies going into Liquidation, Administration or Receivership – the state of the economy does not even appear.

The third major contributor to the level of insolvencies in Australia relates to structural changes within the Australian economy itself

Advancing technology is a good example of these structural changes and wherever structural changes do occur there will be winners and losers. Think of what happened to the businesses that made buggy whips when the horse and cart was replaced by the automobile.

At present one of the major structural changes happening within the Australian economy and indeed the World is the impact of the environmental movement. The attached video excerpt on the effect of the environmental movement on insolvencies in Australia provides an interesting narrative on this topic.

Specifically there is some uncertainty about the future of energy. There is robust debate about climate change and in Australia previous governments with a more leftist leaning have been more inclined to provide subsidies for Australian industries developing alternative forms of energy. At present policy seems to have shifted away from subsidising any form of inefficient industry. A good example of this is the impending closure of the car industry. Those industries such as solar and wind generation that have relied heavily on government subsidies are also clearly at risk.

Not with standing foregoing and whether or not Australia has a Carbon Tax or some form of Emissions Trading Scheme it is clear that in the medium to longer term energy prices will continue to rise. Accordingly Australian companies that are high energy users must seek efficiencies or they too will be at risk. It is therefore likely that company insolvencies in Australia including Liquidations, Administrations and Receiverships will have a much greater representation statistically from industries that are not able to adapt to this changing energy environment.

Irrespective of government policies Australia and the World are becoming far more respectful of the environment .It is also evident that things like energy efficiency is much greater driver for business changes than any form of government policy. This is an example of how free market forces can and will have a positive effect on the environment.

One example of this relates to light globe technology. New LED lighting provides light globes that last for several thousand hours as opposed to the old incandescent technology which last less than 100 hours. In addition the energy usage of the new technology is a fraction of the old .Clearly any company retailing or wholesaling old technology will find it difficult to survive and Australian businesses that don’t move relatively quickly to reduce their energy usage by adopting this kind of technology will be at a major disadvantage.

Australian companies not able to address these structural changes are at risk of closing altogether. Whilst it is difficult to implement a turnaround program using Voluntary Administration or any other procedures for that matter if the underlying business model is not addressed , if the underlying business model is sound then turnaround is a viable option notwithstanding the level of debt or the extent or previous losses.

Jones Partners is expert at investigating these issues and providing professional advice and practical solutions. We can advise on a range of solutions that assists companies in difficulty Including Voluntary Administration, Receivership and various forms of Liquidation. In relation to personal insolvencies Jones partners has 4 registered Bankruptcy Trustees who are extremely active in assisting individuals resolve their personal financial difficulties using various parts of the Bankruptcy Act including Part 10 (Personal Insolvency Agreements) and Annulments pursuant to section 73 Of the Bankruptcy Act.

Is Small Medium Enterprises — the heartland of the Australian economy?


It is clear that SMEs are the back bone of the Australian economy and at a recent function launching the Jones Partners Report into insolvency administrations in Australia Craig James, chief economist of the Commonwealth Bank said that 97% of Australian businesses employ less than 20 employees. It is therefore not surprising that over 80% of companies that fail are in this category. The businesses that dominate the corporate failure statistics roughly parallel the businesses in the SME sector and are very highly represented amongst construction, retail and professional services.

The Jones Partners Report looked in some detail at the effect on the Australian economy of the failure of companies in the Australian SME space. The report demonstrates the remarkable fact that this sector contributes substantially more to unemployment than the failure in relation to large companies which often gets much more media attention. The attached video excerpt on the significance of small medium enterprises (SMEs) provides an interesting narrative on the role they play both in respect to the Australian economy and corporate and personal insolvencies.

In the SME sector it is impossible to separate the ownership of the business from the management. Having regard to the fact that we now know that management failure is the major cause of company liquidations it is clear that these issues need to be addressed before any effective turn around program can be implemented.—Turnaround is nevertheless still achievable—

One method used in the turnaround management of companies is the Voluntary Administration process found in part 5.3 A of the Corporations Act

This process usually involves creditors accepting a compromise in relation to the outstanding debt potentially including extended payment terms

Voluntary Administrations are a formal process involving the appointment of an Administrator who prepares a report to creditors and convenes meetings the purpose of discussing the future of the company

Creditors then vote on whether or not to accept the proposal and this vote is based on numbers and value so clearly not all creditors are required to agree for the proposal to be binding

The procedure is very effective in the Australian SME sector but it does require a clear and accurate identification of the underlying problem together with a credible argument that the problem has been rectified or that the very least there is a convincing plan to achieve that end

If this cannot be done liquidation may be the only alternative

This of course does not always mean that the business is closed. It is possible in some situations of the business to be sold as a going concern to new owners. This preserves the goodwill of the business and can have the effect of saving jobs

Jones partners handle many turnaround assignments particularly using the voluntary administration process. Jones Partners is expert at investigating these issues and providing professional advice and practical solutions. We can advise on a range of solutions that assists companies in difficulty Including Voluntary Administration, Receivership and various forms of Liquidation. In relation to personal insolvencies Jones partners has 4 registered Bankruptcy Trustees who are extremely active in assisting individuals resolve their personal financial difficulties using various parts of the Bankruptcy Act including Part 10 (Personal Insolvency Agreements) and Annulments pursuant to section 73 Of the Bankruptcy Act.

How does the Asian economic boom affect Australian insolvencies?


There is no doubt that the global economy is going through enormous structural change as the weight of global economic activity increasingly shifts towards Asia. The above diagram demonstrates that in 2012 the Asia-Pacific region together with the Indian subcontinent accounts for in excess of 36% of world GDP. Australia has benefited greatly from this structural change. Three quarters of Australia’s exports are to Asia. We have a similar dependence on Asia with respect to tourism and immigration.

Australia has just emerged from the largest resources boom in its history and this is largely as a result of the economic development of mainland China. Moreover the structural change seems to be permanent which means that Australia is in an excellent position for the foreseeable future.

In June 2013, Jones Partners commenced a major research project into the state of the Australian economy, businesses at risk and insolvencies. At a function announcing the launch of this project, Mr Phil Ruthven, Chairman of Ibis World spoke in glowing terms about the opportunities afforded to Australia by the Asian economic boom. See the video excerpt taken from the presentation to see what Phil had to say on the subject.

However there are risks that cannot be ignored. There is currently a rebalancing taking place as the mining investment phase draws to an end and it is unclear as to whether the domestic economy will pick up quickly enough to counter this investment turn down. The Jones Partners research project has culminated in a report entitled “Collapse Restructure and Renewal-The State of the Australian Insolvency Market” which will be released at a function to be held at The Institute of Chartered Accountants on 29 July 2014. The author of the report, economist Mr Chris Nadarajah will join an eminent panel including Ibis World this chairman Mr Phil Ruthven and the Commonwealth bank’s chief economist Mr Craig James to discuss the report.

It is also important to note that this economic boom does not make Australian businesses immune from failure. The increased pace of the Australian economy as a result of this boom clearly leads to many more opportunities and perhaps greater entrepreneurship (which means risk-taking) and on its own this could increase rather than decrease the number of insolvencies. This is because it has been clearly demonstrated that insolvencies are more dependent on the quality of management than the state of the economy. Of course this does not mean that the state of the economy is not a major contributor to insolvency levels. Our research shows that the level of economic activity has a close correlation with the numbers of insolvencies.

The major macroeconomic contributor to insolvency levels is economic structural change which is clearly what is happening in the Australian economy as a result of the boom in Asia. We have already seen most of Australia’s manufacturing go offshore and we are now seeing external pressures on many other industries that would otherwise seem to be immune. Accountancy services for example are now being increasingly outsourced to places like India.

Overall Australia will clearly reap immense benefits from the growth in Asia however there are both downside an upside risks. The changes taking place in the Australian economy will clearly have an adverse effect on some industries and this will have a consequential increase in the number of insolvencies in those areas.

Other related articles:

Rates of Currency Exchange – Impact on Australian Businesses

Is Management the key driver of business success or failure?

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Is Management the key driver of business success or failure?

Although external factors do play a part in the success or failure of a business, research shows that internal factors such as the quality of management is far more important.
The report prepared by the Australian Securities and Investments Commission (ASIC) on the reason for company failures has consistently concluded that the major reason for company failures is “poor strategic management “. The second most common reason cited for business failure is a failure to maintain proper books and records. This of course can be seen as one in the same as bad strategic management.

In June 2013, Jones Partners commenced a major research project into the state of the Australian Economy, Businesses at Risk and Insolvencies. At a function announcing the launch of this project, Mr Phil Ruthven Chairman of IbisWorld, drew some interesting conclusions. Refer to the video on an excerpt taken from the presentation.

Many economists consider that the Australian economy is in reasonably good shape. Clearly interest rates are low inflation appears to be under control and growth appears to be positive. Notwithstanding these happy statistics company liquidations continue to rise and Personal Bankruptcies remain at record high levels. Factors other than general economic conditions are clearly very relevant.

The ASIC report also demonstrates that the vast majority of company liquidations relates to small independent family owned businesses. In particular, 81% of companies that failed had less than 20 employees and 85% had less than $100,000 in assets. The small business sector is clearly under the most pressure at the present time and the major risk factor is the quality of management. The components of good management are not well defined particularly with reference to the small business sector. However, it is my belief that it is the personality drivers of individual business owners that defines management.

Economist Chris Nadarajah has been commissioned by Jones Partners to oversee this project and his report will be presented at a function to be held at the Institute of Chartered Accountants Australia on 29 July 2014. If you are interested in attending this meeting, please feel free to contact me.

Related Article:

Rates of Currency Exchange – Impact on Australian Businesses – Jones Partners

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Employee Entitlement Safety Net Scheme – Costs Escalating!

Historically in Australia there is a general societal acceptance that employees should be protected in the event of insolvency. This arises largely from the premise that employee’s are the lifeblood of the business. Indeed Corporations and Bankruptcy Acts provide that employees are entitled to receive their outstanding entitlements in priority to other unsecured creditors.

In certain circumstances, these priorities see employees rank ahead of secured creditors (ie Banks) regarding realisations made from certain assets. Practically, however this priority may not result in employees actually receiving some or all of their entitlements especially if the company does not have sufficient assets to pay such entitlements.

In 2001, the Federal Government introduced a taxpayer funded safety net scheme for employee entitlements in the event of an employer’s insolvency where there were insufficient company assets available to pay employee entitlements. Importantly employee entitlements were defined to exclude superannuation. Furthermore, it was put in place as an operative scheme and as such was not enshrined into legislation. There has been discussion from time to time about whether such scheme would ever be repealed, however as time passes it could be argued that this becomes less likely.

The need for such scheme was due to a number of high profile corporate collapses resulting in employees not receiving their employee entitlements. Initially, referred to as the Employee Entitlement Support Scheme this developed into the General Employee Entitlements and Redundancy Scheme (“GEERS”). GEERS fundamentally made the Federal Government the guarantor of certain employee entitlements such as unpaid / underpaid wages, unpaid annual and long service leave, redundancy and payment in lieu of notice. Upon payment of any employee claims, the Federal Government would subrogate an employee’s priority distribution status in the event of a distribution in a liquidation or bankruptcy pursuant to Section 560 of the Corporations Act and Section 109 of the Bankruptcy Act.

Over the years, the scheme has been refined to incorporate a greater level of entitlements. GEERS has more recently evolved with the introduction of the Fair Entitlements Guarantee Act 2012 (“FEG”). FEG provides a firm legislative footing and reassurance to employees regarding any unpaid entitlements owing by employers as a result of insolvency.

Over recent years we have seen a marked increase in total funds advanced under the GEERS / FEG. Below is a summary of the total funds advanced under the safety net scheme through its various names for the period 1 July 2002 to 30 June 2013.

Geers-FEG Funds Advanced

During the eleven (11) year period shown in the graph there has:

  • been a fivefold increase in the amount of funds advanced under GEERS / FEG from approximately $50 Million to over $250 Million;
  • the number of claimants has gone from approximately 8,700 per annum to approximately 16,000 per annum; and
  • the average entitlement per claimant has increased from approximately $7,000 to $16,000.

Whilst it is important that a safety net scheme does exist, the cost of such as scheme is significant and careful consideration needs to be continually taken to ensure that it achieves the initial intended aims.

We understand that some changes may soon be announced to limit redundancy claims under FEG.

Rates of Currency Exchange – Impact on Australian Businesses – Jones Partners


According to a recent report issued by the ASIC the main reason for Corporate insolvencies can be related to ”bad strategic management” It may seem that exchange rate fluctuations are beyond the control of business managers and it is obvious that currency variations have a major contributor on Australian businesses.

If a business relies heavily on sales to overseas customers, a high Australian dollar will cause serious problems.  On the other hand if the business purchasers goods and service from overseas a strong dollar will be a major advantage.  In some cases a minor variation in exchange rate can be the difference between success and failure.

Whilst the exchange rate itself is beyond the control of individual managers, the management of this fluctuation is not.  A good business operator will be watching exchange carefully and looking for opportunities to capitalise on this variation.

If a business is heavily affected by currency fluctuations, management needs to consider its policies carefully surrounding such things as negotiating contracts in Australian dollars to avoid the obvious risk.  On the other hand, with expert knowledge of currency rates, businesses owners can in some circumstances, take advantage of currency fluctuations if the business can choose the timing of its payments, or fixing exchange rate terms in contract negotiations to avoid any major cash flow difficulties and the subsequent need for recovery action.

A major project into the study of Insolvency Trends in Australia is being sponsored by Jones Partners and was introduced by Phil Ruthven, Chairman of IBISWorld at a function held in July 2013. (please see extracts of the attached video). The Jones Partners Economics Report entitled “Collapse, Restructure & Renewal – State of Australia’s Insolvency market” will be issued in early 2014 and will deal with the impact of currency fluctuations of Australian businesses.  This report will be the first study of its kind on the Insolvency Trends in Australia.