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ASBFEO recovery reforms desperately needed, says expert

Adrian Flores
Adrian Flores
03 July 2020 1 minute readShare
Patrick Coghlan

The recommended reforms for small-business recovery from small business ombudsman Kate Carnell are the first in a much-needed long-term plan to ward off a wave of insolvencies, according to an SME industry expert.

Ms Carnell recommended a number of reforms for the post-COVID-19 recovery phase, including a new industry award, a federal claims tribunal, a government-backed revenue-contingent loan and a small-business procurement panel.

SME industry expert and CreditorWatch chief executive Patrick Coghlan said legislating 30-day payment terms for small businesses will go a long way in ensuring that SMEs can access the capital they need to continue to operate.


“According to our Q1 2020 data, payment times by small and medium businesses stretched out by an average of nearly 40 per cent,” Mr Coghlan said.

“This highlights the fact that businesses were suffering from cash-flow problems well before the COVID crisis.”


Mr Coghlan said the increase in instant asset tax write-off for small businesses in March came at a time where businesses were more focused on survival than spending, and that extending the 1 July deadline and making the threshold permanent will provide a beacon for SMEs and ensure they can access the deduction at a more suitable stage.

Further, Mr Coghlan noted that issues with cash flow can have immediate and real-life knock-on effects for small business and can be the difference between a business owner’s ability to not only pay staff but also school or daycare fees.

“Just one payment default can have a ripple effect — in fact, 50 per cent of businesses that incur a payment default typically go into administration within 18 months,” he said.

“The introduction of a ‘fit for business’ grant would help to kickstart the small businesses that have been directly impacted by cash-flow issues and provide them with a much-needed injection of capital.”



Mr Coghlan also said that given that the planned lifting of the Safe Harbour laws in September would see a wave of SME insolvencies as businesses find themselves without cash or assets and in considerable debt, the advocacy from Ms Carnell of a 12-month extension on the moratorium is unsurprising.

“Extending this initiative — or at least staggering how it is lifted — would allow us additional time to plan for the inevitable insolvencies that will follow and give the SME sector the best fighting chance of finding some stability,” he said.

ASBFEO recovery reforms desperately needed, says expert
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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