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Government agencies pull plug on company wind-ups

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
19 May 2020 1 minute readShare

The ATO is not the only government agency taking a soft approach to debt matters, with other government offices said to have considerably tamed their usual firm stance towards businesses over the last couple of months.

Court records show that 705 businesses were issued with a wind-up notice in the January to March quarter, down by a considerable 26 per cent compared to the previous three-month period and 22 per cent year-on-year, debt recovery agency Prushka revealed.

Through March, there was a notable shift from government petitioners to private businesses, with private wind-up applications accounting for 66 per cent of the total. In contrast, in October–December, the Australian Taxation Office (ATO) and other government agencies accounted for 57 per cent of all company wind-ups.  

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Roger Mendelson, CEO of Prushka, said these figures indicate government decisions have been made to defer wind-up activity in March and onwards.

“The severe drop off from the ATO and other government agency wind-ups indicates a clear policy decision from government — it’s not surprising they are going easy on Australian businesses given the current economic climate,” Mr Mendelson said.

 

Despite the looming coronavirus-inflicted recession, Mr Mendelson does not anticipate private wind-ups will increase into the future, as most corporates have put a hold on serious debt collection.

“Previously, statutory demands required action within 21 days, which allowed a very quick debt collection procedure without any judgements needed,” he added.

“However, from the start of April, companies in receipt of a statutory demand have six months to respond — this will slow the whole debt collection process down.”

While the significant drop in company wind-ups could suggest that businesses are surviving on the various government stimulus packages, Mr Mendelson opined the real results won’t be known until restriction are lifted later in the year.

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“Company wind-up figures are always modest, as there would be a far larger number of companies which are technically insolvent, however may not be commercially viable to wind up. With loosening laws on insolvent trading, I expect a significant number of companies fall into this bucket.”

According to Prushka’s data, the ATO instigated 119 wind-ups in January to March, while other government agencies processed 120. Private applications, however, made up 466, with a majority coming from Victoria at 254, closely followed by New South Wales at 250.

Looking ahead to April, Mr Mendelson believes the trend will be clearly established that government agencies including the ATO have almost ceased issuing statutory demands.

Government agencies pull plug on company wind-ups
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe. 

You can email Maja on [email protected] 

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