Imagine what you could do with tax saved? Reduce your home loan Top up your super Save for a holiday (when we can travel again!) Deposit for an Investment Property Pay for your children’s education Upgrade your Car Here’s a guide to the strategies you can use to minimise your business tax.

Collins Hume's teams in Ballina and Byron Bay raised more than $4,000 in last weekend's Byron Coast 2021 Charity Walk. With the Westpac Rescue Helicopter providing vital 24-7 aeromedical search and rescue services across the Northern NSW region, Collins Hume was able to raise $4,833 thanks to the support and generosity of our families, clients and the wider community. Donning t-shirts specially designed for the day and with bags of enthusiasm, Collins Hume set out early in three teams covering 12km, 24km and 36km courses. Collins Hume Accountant and fundraising organiser Kim Roy has since crunched the numbers. "On the weekend we walked a combined total of 322km which equates to approximately 467,500 steps," says Kim. "Thus far we have raised $4,833 which, if we were all in one team, would make us the second-highest fundraiser." Make no mistake, the Byron Coast 2021 Charity Walk was no cakewalk, but the effort put in by all the Collins Hume team paid off so was certainly well worth it. "There are a lot of blisters and a few tired legs but overall the atmosphere on the weekend was on a real high," Kim added. "Everyone was so proud of themselves and that we were able to push past what we thought we could do." "I'm really proud to be part of a team of 'out there' individuals who are willing to get up from behind the desk and have some fun while raising money for a great cause." Every dollar raised helps to keep the Rescue Helicopter flying 24-7 for those in need. You can still support Collins Hume's fundraising efforts to keep helicopters and crews ready to respond when needed by following the sponsorship page links here. To find out more about how Collins Hume's gets involved and gives back to our community, please read more at Our Giving Impact.

Chris Atkinson, our CEO, talks about the Collins Hume mission.

My name is Chris Atkinson, and I’m the CEO here at Collins Hume. Our core values aren't just typing on a website. These really are what we are. We documented these core values; it was easy. Collins Hume’s core values are: Lifestyle. Fun and enjoyment. Balance your business with your life. Inspiring. Today, every day, we will inspire others to achieve their best. Caring. We care for our team, we care for our clients, and everyone we connect with. Giving. We always give more than we receive. See us in the Ballina or Byron Bay office, or reach out over the phone.

The uncertainty of last year is in the rearview, but a bumpy road still lies ahead More than ever, businesses need to understand and manage their finances to navigate the new terrain of 2021, not just to survive but thrive. 2020 lost some great companies, and the years to come will take more. So how can you begin protecting yourself and your investments when the landscape is still shifting below your feet? Here are some essential tips to consider: Know your tolerance for financial risk According to Yelp.com's Local Economic Impact Report, for more than 97,966 businesses, 2020 caught them off guard, causing them to close their doors permanently. Though traffic is picking up for some, there is no promise that revenue will get better for all businesses. Are you ready to put it all on the line? If you are, there is success out there. If you're not, you may need to consider a strategic pivot seriously. OK, now that we have gotten that out of the way. Let's move on to some positive action steps. Build a budget We know we can not predict what lies ahead. However, we can learn from the past, make educated assumptions, and create a budget for the possibility of a tumultuous 2021. To help plan a tentative budget, here are a few questions you should ask: What was revenue like in January and February of 2020? How did it compare to profits in April of 2020? What do you experience as the pandemic restrictions ease/tighten? Do seasonal changes affect your revenue? Do you have revenue streams that continue to grow? Have you increased or decreased expenses during the pandemic? No one knows what's in store for business owners in 2021, but we do know that to survive 2021, business owners need to understand the financial basics for their business. Utilising powerful apps to build a budget will help you do just that. Know your goals For some businesses, making goals for 2021 might seem elusive, especially coming out of a year like 2020. However, by taking the time to define your goals, you will find the grit you need to stay in the fight. Success isn't by chance. Simply dreaming and hoping for growth in 2021 will not cut it. Tips to setting achievable goals: It's still OK to dream big Write your goals down Set achievable milestones Share your goals Work on your goals daily Be SMART (Specific, Measurable, Achievable, Relevant, Time-bound) Actively analyse finances By consistently running a balance sheet and updating your financial statements, you'll always have your thumb on the pulse of your business. There are excellent apps available on the Xero App Marketplace to do just this. If you are uncomfortable building various reports, get help from a trusted advisor like an accountant or bookkeeper who will help you understand your economic landscape. Understand your cash flow Businesses are showing a steady improvement in their spending outlook as 2021 gets underway. As a business owner, you need to know where to spend your money and where to pull it back. Though a business can look successful on paper, businesses fail at an alarming rate due to cash flow. It is essential to shorten the days between spend and collection from sales. The fewer days between the two means more cash on hand and less you will need to borrow. Developing a cash flow projection will ensure you have the money to pay vendors, staff, lenders, and yourself. Here are some apps that can help. Separate business and personal It's more important to separate business from personal finances in 2021. Making the separation will ensure you treat your business like an independent entity while protecting your financial circumstances with a 'corporate veil'. This type of protection makes the company accountable for any debts or legal responsibilities rather than holding the owner personally accountable. Save for emergencies For businesses that have made it through the COVID-19 pandemic, this might be hard. But you got this. Understand you need to count every dollar and make every dollar count. Here are a few cost-saving ideas to help free up money to save: Go paperless Don't pay for landlines Stick to your budget Time management is vital Cut production costs Hire freelancers Travel less Create partnerships for co-marketing Buy from the 'little guy' – for example, your local suppliers and other small businesses Listen to your customers For lots of companies, during economic downturns, they stop serving their current customers and start desperately looking for new customers. A better approach is to produce new products and services for customers who already know and love you. Your customers will let you know how to stay in business. Consider taking the necessary steps to listen to your customers by giving them a way to connect with you 24/7. Don't stop there. Listen to them with the intent to act. Your customers are letting you know how you can serve them better. Remember, other companies are looking for new customers, and if you are not tending to yours, your competition will. Focus on the future, not the past 2020 was devastating for the world in many regards, but there is still a bright future ahead. We must learn from our past, but we mustn't stay in our past. The future is in our imagination, so why not imagine a future of possibilities. When you set your goals, budget, or strategies, be realistic but still shoot for the stars. Be agile Be prepared for anything; you have got to be able to think on your toes. 2021 will not give you the time to cut through red tape. If you're too slow to open the door when opportunity knocks, it will head over to your competitor's open door. Become more efficient by automating redundant tasks to free-up management from routine, time-consuming tasks and allow them to engage in business strategies to increase profits and customer service. Be adaptable Success comes to those that can roll with the punches. Many businesses failed due to their inability to be adaptable. You should be able to pivot at a moment's notice in good times or bad. This past year we saw restaurants close in droves while others seemed to thrive. The difference was the quick adjustment to delivery and curb-side service. Showcase your differentiation In 2021 brand connections are becoming more critical for consumers. Customers are now looking for brands they can trust and support during these challenging times. Companies need to step up and show they are willing to provide superior customer service, operational excellence, clear and transparent communication, and affordable products. Especially in times of struggle, people are looking for assurance that good is out there. Now is the time to shine and show others you care. Remember your 'why' Most important, you have got to remember why you went into business in the first place. Do you have clarity around the 'why' of your business? No? That's OK, but it's time to figure it out. It is not about making money; that is the result. Your why should be the purpose, cause, or belief behind the reason your organisation exists. Knowing why you are in business can help you make hard choices, stay focused on your goals, and take the necessary risks needed to succeed. The landscape is uncertain for 2021, but there is reason to be optimistic. Businesses that stimulate growth with new products and services create jobs and infuse the economy with the money it needs to recover. Collins Hume Accountants and Business Advisers | Ballina & Byron Bay NSW | Ph 02 6686 3000 Source: Xero

Collins Hume fundraising for the Westpac Rescue Helicopter Service Key fundraising points It costs about $40 million a year to keep helicopters and crews on call, ready to respond About $12 million of that cost is raised through sponsorships, volunteer, support groups, events and community partnerships The remainder is funded through contracts with NSW Health and NSW Ambulance. On 22 May, Collins Hume is putting up a team to raise much-needed funds for the Westpac Rescue Helicopter Service. Every dollar raised contributes to keeping the Rescue Helicopter Service available 24/7, 365 days a year. Each of our team has a personal goal to individually raise $250 per person. Adding to that, Collins Hume has kicked in for registration fees and team uniforms, but we need more help. This year, we'll be setting out in three teams covering three courses – 12 kms, 24 kms or 36kms. We're asking for as many people as possible to choose a course and back us to finish: Sponsor our 12 km course https://events.rescuehelicopter.com.au/fundraisers/collinshume12 Sponsor our 24 km course https://events.rescuehelicopter.com.au/fundraisers/collinshume24 Sponsor our 36 km course https://events.rescuehelicopter.com.au/fundraisers/collinshume36 Current fundraising leader Chris Priester said, "I volunteer with a rescue organisation and have seen first-hand the very good work that the Rescue Helicopter pilots and crew do to support the community." "Whether it is transporting casualties who require urgent medical care or extricating people from areas that would otherwise be too dangerous to reach the Rescue Helicopter has proven to be an essential life-saving tool. "This is my fifth walk to help raise funds for this valuable service. Only last year our grandson was flown from Lismore to Gold Coast University Hospital for emergency treatment which saved his life," added Val Anderson. Collins Hume fundraising organiser Kim Roy said, "I'm really proud to be part of a team of out there individuals who are willing to get up from behind the desk and have some fun while raising money for a great cause." Every dollar we raise helps to keep the Rescue Helicopter flying 24-7 for those in need. Please support our team's fundraising efforts to keep helicopters and crews ready to respond when needed. Background The Community's Own Westpac Rescue Helicopter proudly provides a vital 24-7 aeromedical search and rescue service for the people of Northern NSW. The service is on call 24 hours per day, seven days per week. Approaching 2,000 missions each year these include: Primary – attend accident site, treat and transfer patients to hospital Secondary – transfer patients between hospitals for specialist treatment Search and rescue – help to locate missing people, rescue and return to safety The Service delivers world class care for 1.5 million people from three bases in Lismore, Belmont and Tamworth. In 2017 the Service added AgustaWestland AW139 helicopters to the fleet. These state of the art Italian-built aircraft enable the Rescue Helicopter crew to fly further and faster, saving valuable time and precious lives. Along the Pilot and Aircrew Officer, every primary response mission today leaves with a dedicated NSW Ambulance Paramedic and Local Health District Doctor and depending on the needs of each patient the team may include specialist nursing professionals. Together, the highly trained Rescue Helicopter team is working to ensure the highest standard of care is provided for every patient at the scene of their accident.

In the name of shopping locally and supporting our community, this year's prizes will be purchased from Collins Hume business clients. To join: Go to https://www.iTipFooty.com.au Click the 'REGISTER' button if you don't already have an account with iTipFooty.com.au Once you have successfully registered login and, click the JOIN COMP button Enter Comp # 103098 and Comp Password CH1234 Click join comp.....DONE! Competition details Comp Name: Collins Hume 2021 NRL Comp#: 103098 Comp Password: CH1234 Comp Type: FREE Comp Starts: 12 March 2020 Manager's Name: Tim McOmish Manager's Email: tim.mcomish@collinshume.com.au TIP CUT-OFF TIME for our comp is 5-minutes before the match each week. Prize information First prize: $300 in gift vouchers sourced by Collins Hume from local businesses Second prize: $100 in gift vouchers sourced by Collins Hume from local businesses Third prize: $50 in gift vouchers sourced by Collins Hume from local businesses Knockout Comp Winner: $100 in gift vouchers sourced by Collins Hume from local businesses Good luck! We look forward to announcing winners at the end of the season. REGISTER HERE Huge thanks to the business owners who have provided these amazing prizes for this year's competition.

Key changes We outline the implications of the draft ruling by the Australian Tax Office (ATO) in terms of how Professional Firms (Accountants / Solicitors / Engineers, etc.) allocate their profits. This is a change from what has been done in the past and will have consequences for professional firms. The ATO's risk-based compliance approach requires two qualifying 'gateways' to be passed before applying their risk assessment framework. The gateways require those with non-commercial arrangements, and those arrangements with high risk features to engage with us before applying the guidance. Where an IPP passes the gateways, they then self-assess against the risk assessment framework to determine the type of compliance attention that will be given to their arrangement. The draft PCG combines three previously separate risk assessment measures into a single methodology. This gives an overall risk rating of low, medium or high risk, including: the proportion of profit entitlement from the whole of the firm group that is returned in the hands of the IPP the total effective tax rate for income received from the firm by the IPP and associated entities the renumeration returned in the hands of the IPP as a percentage of the commercial benchmark for the services provided to the firm. On application of the three risk assessment measures, an IPP will be rated as 'low risk' where all the following apply: greater than 50% of their profit entitlement from the whole of firm group is returned in their personal income tax return the effective tax rate paid by the IPP and their associates on their profit entitlement from the firm is greater than 30% the IPP returns an amount of income in their personal income tax return which reflects at least an appropriate return for their services to the firm. Where arrangements featuring high risk features or lacking apparent commercial rationale are identified, we will treat the risk through application of integrity provisions, including Part IVA. What you need to do We encourage you to seek independent professional advice or contact Collins Hume directly to discuss your situation if you are an IPP who: does not pass the gateways provided in the draft PCG are medium or high risk on self-assessment of the risk framework. We will continue to examine arrangements that go beyond the intent of the draft guideline. The ATO's revised guidance explains how we intend to apply a risk-based compliance approach when considering the allocation of professional firm profit, or income in the assessable income of the individual professional practitioner (IPP). The release of draft Practical Compliance Guidance PCG 2021/D2 follows consultation with peak professional bodies and other affected stakeholders. The draft guidance aims to provide consistency and a level playing field across the industry.

COVID-19 lockdowns have added another layer of complexity as many work patterns and behaviours changed. Fringe benefits tax (FBT) is one of Australia's most disliked taxes because it's cumbersome and generates a lot of paperwork. A fringe benefit is a 'payment' to an employee or an associate (an associate is someone related to you such as a spouse, child or even a friend), but in a different form to salary or wages. A benefit might be as simple as hosting a work Christmas party, providing car parking, using a work vehicle, or providing the goods or services of the business at a reduced rate to what the public pay. If your business is not already registered for FBT, it's important to understand if fringe benefits have been provided. Generally, the ATO will look closely at unregistered employers and where there are mismatches in data. With the FBT year ending on 31 March, we look at the key issues and the Australian Taxation Office's (ATO) hotspots. What is exempt from FBT? Certain benefits are excluded from the FBT rules if they are provided primarily for use in the employee's employment. These include: Portable electronic devices (e.g. laptop, iPad, printers, GPS, etc). Larger businesses are limited to the purchase or reimbursement of one portable electronic device for each employee per FBT year; A handbag, briefcase or satchel to carry items you are required to use and carry for work, such as laptops, tablets, work papers or diaries. Be warned that if you are using these bags for a mix of personal and work use, then the use needs to be apportioned and will not be fully exempt from FBT. The ATO is not going to pay for your Gucci bag even if you do throw your iPad into it on occasion. Tools of trade. Also, if the item or service provided to the employee is less than $300 and is a one-off, it's generally classed as a minor benefit and exempt from fringe benefits tax. COVID-19 & FBT The ATO has changed how it will approach FBT compliance this year because of the impact of COVID-19 on work patterns and conditions. Emergency assistance such as flights and accommodation – emergency assistance to provide immediate relief to employees because the employee is at risk of being adversely affected by COVID-19 will generally not be subject to FBT. This might include: Expenses incurred relocating an employee, including paying for flights home to Australia. Expenses incurred for food and temporary accommodation if an employee cannot travel due to restrictions (domestic, interstate or intrastate). Benefits provided that allow an employee to self-isolate or quarantine. Transporting or paying for an employee's transport expenses including car hire and transport to temporary accommodation. For fly-in fly-out workers, this includes temporary accommodation and meals where they were unable to return home because of border or travel restrictions. Health care – Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care. However, health care treatment is only exempt from FBT if it is provided to your employees at your workplace or adjacent to your worksite. The cost of ongoing medical costs are generally not exempt. Company cars – a company car garaged at an employee's home will generally attract FBT. However, this FBT year, many company carparks and places of business were closed. As a result, the ATO has stated that for employers using the operating cost method, if the "car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for the purpose of maintaining the car, we will accept that you don't hold the car for the purpose of providing fringe benefits to your employee." But, you will need to maintain odometer readings that show the car has not been used. If the car was used, fringe benefits generally applies. However, if the car was used for business purposes then this use reduces the taxable value. If the car was only used for business, the taxable value may be reduced to zero. Logbooks – COVID-19 is likely to have impacted on driving patterns and the ATO have made some concessions where the 12 week log book period was interrupted. If you are already using the logbook method and have an existing logbook in place, you can still rely on this logbook. However, you must keep odometer records for the year to show how much the car has been driven during the year including during any lockdown period. If this is the first year you have used a logbook, you still need to keep an accurate 12 week logbook. However, if COVID-19 impacted driving patterns during that 12 weeks, then the ATO will allow you to adjust the use indicated in the logbook to account for the change in driving patterns. Not-for-profit salary packaging – NFP employers often provide salary-packaged meal entertainment to employees to take advantage of the exempt or rebatable cap. For the FBT year ending 31 March 2021, the ATO has stated that they will not look into these arrangements where meals are provided by a supplier that was authorised as a meal entertainment provider as at 1 March 2020. Cancellation fees – non-refundable costs for cancelled events are exempt from FBT unless the employee paid for the event themselves and was reimbursed by you. That is, if the employer paid for the event then the cancellation fee is the employer's obligation as no benefit was provided. If the employee paid for the event, the cancellation fee is the employee's obligation that has been reimbursed. It really depends on who the arrangement was between. ATO 'red flags' One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches in the information provided to the ATO. Common problem areas include: Entertainment deductions with no corresponding fringe benefit – A simple way for the ATO to pick up on a problem is when an employer claims a deduction for expensive entertainment expenses – meals out, tickets to cricket matches, etc., – but there is not a corresponding recognition of the fringe benefit. Entertainment expenses are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT. If your business uses the 'actual' method for FBT purposes and the value of the benefits provided is less than $300 then there might not be any FBT implications. This is because benefits provided to a client are not subject to FBT and minor benefits provided to employees (i.e., value of less than $300) on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either. If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the company would be able to claim 50% of the GST credits. Employee contributions reduce fringe benefits tax but not recognised in income tax return – Where employee contributions reduce the amount of fringe benefits tax payable (for example where an employee makes a contribution relating to a car fringe benefit), a corresponding amount needs to be recognised in the income tax return of the employer.

A sole trader who was able to backdate his ABN has won access to JobKeeper payments in a recent case before the Administrative Appeals Tribunal (AAT). To be eligible to access JobKeeper as a business participant (for example, as a sole trader), the rules require a business to have an active ABN on 12 March 2020. The rules also provide the Tax Commissioner with the discretion to allow further time for an entity to register for an ABN. In this case, a sole trader, Mr Apted was an expert property valuer who had been in business for himself in various structures since 2012. In 2014, he set up as a sole trader and registered for an ABN and GST. In 2018, he decided to retire, cancelling his GST registration and later relinquishing his ABN with effect from 4 June 2018 - although he was aware that he had the flexibility to start up again if the need arose or his expertise was required. In June 2019, former colleagues encouraged him to accept new work and he was contacted soon after by a potential client who engaged him to provide his valuation services in September 2019. Mr Apted made it known that he was available for referral work. Mr Apted stated that he was unaware that he needed to reactivate his ABN as he believed that an ABN was only required if he intended to register for GST. Given he did not expect to earn over the GST threshold of $75,000, he did not see this as necessary. His clients also did not withhold tax from payments to him as required when payments are made to a supplier without a valid ABN. On 31 March 2020, Mr Apted applied and had his ABN reinstated. Then on 20 April 2020, he applied for JobKeeper but this was denied as he did not have a valid ABN on 12 March 2020. In June, Mr Apted phoned the Registrar of the Australian Business Register seeking to have the date of effect of his ABN corrected to align with his resumption of trade. The Registrar subsequently adjusted the date of effect of the ABN to 1 July 2019. With this adjustment, Mr Apted believed he had an active ABN at 12 March 2020 required by the JobKeeper integrity rules. The Tax Commissioner however did not accept the backdated ABN as an "active" ABN and declined to use his discretion to allow Mr Apted access to JobKeeper. However, the Administrative Appeals Tribunal (AAT) found: "We are satisfied the applicant is the kind of person who was intended to benefit from the Jobkeeper scheme. While his business was small and his income irregular, he still satisfies all of the eligibility criteria … There is nothing to be achieved by denying him access to the payments in order to make a point about the desirability of obtaining an ABN." The AAT set aside the Commissioner's decision in favour of Mr Apted directing the ATO to enrol Mr Apted in JobKeeper for the relevant period. A statement from Holding Redlich, the legal firm representing Mr Apted says, "Small businesses that have been refused JobKeeper might now qualify for JobKeeper – and be entitled to make claims back until the beginning of the scheme in April 2020." The ATO has lodged an appeal with the Federal Court of Australia in the Apted case and has stated that it will not pre-emptively review decisions of eligibility until the outcome of the appeal has been handed down. Giving further hope to those who had previously been denied access to JobKeeper under a strict interpretation of the rules is the recent report from the Inspector General of Taxation (IGT). JobKeeper and the Cashflow boost require that the business had some business income in the 2018-19 income year and notified the ATO of this by 12 March 2020 or made some supplies connected with Australia in a tax period that started on or after 1 July 2018 and ended before 12 March 2020 and notified the ATO of the supplies (e.g., on an activity statement) by 12 March 2020. In her report, the IGT has made it clear that, "…for the purposes of the [JobKeeper] and [Boosting Cash Flow] support measures, a taxable supply can be made where an entity makes or acquires a financial interest, for example, by opening a bank account, as this constitutes the making of a financial supply. Such a supply might have been made during the commencement of the business, well before the business had made its first sale." For any business seeking redress on a JobKeeper or Cashflow boost eligibility decision, strict timeframes apply. Despite the ATO's reticence to engage on these issues until the outcome of the Federal Court is known, it is important to lodge the necessary applications or objections to ensure the window of opportunity is not missed. Take-outs An ABN backdated by the Business Registrar may meet the JobKeeper eligibility criteria Simply opening a bank account and advising the ATO of the account (for example when registering for GST) in the relevant time period (by 31 December 2019 for quarterly or 29 February 2020 for monthly taxpayers) might meet the eligibility test to make a supply in Australia – even if the business had not made any sales.

You’ll never know what’s possible until you try Collins Hume Partner, Kelly Crethar, is passionate about helping business owners achieve their goals in business. Kelly is a highly qualified and experienced business services specialist with a passion for helping business owners achieve their goals. With over 20 years of experience in the field, Kelly has a wealth of knowledge in business planning, structuring, management, acquisitions, valuations, and regulatory compliance, with a special focus on professional services, hospitality and retail, building and construction, property development, health, and larger intricate structures industries. "I love working with people and helping them achieve their goals," says Kelly. "Understanding the financial side of a business is something that doesn't come easily for everyone." "I love being able to interpret the financials into information that business owners can easily grasp." Kelly joined Collins Hume in 2017 and believes it is the firm's commitment to helping the community which she admires. "We often speak to our clients about work/life balance and that is a focus here at Collins Hume too." Kelly has been the presenter of Collins Hume's popular Better Business Workshops which are designed to educate business owners. She acknowledges that it can be daunting for young people to enter into the world of accounting and business advising but says the industry has so much to offer and having a female perspective on business is so valuable. "You'll never know what's possible until you try, so go for your dreams and never give up," Kelly added. When she's not working, Kelly enjoys spending time with her family and golden retriever, Max, and can often be found at the beach or enjoying the great outdoors. She is also an avid cook and is co-opted to keep the books for her husband's business. Kelly holds a Bachelor of Business (Accounting & Business Law) from Southern Cross University and is a Certified Practising Accountant (CPA), Xero Certified Advisor, and Registered Tax Agent. She began her career in 2001 as a Trainee Accountant in public practice and worked her way up to becoming a Senior Manager before transitioning to the corporate sector, where she spent five years as a Corporate Accountant in the road transport industry. Kelly joined Collins Hume in 2017 where she helps clients navigate the complex world of business. Her areas of expertise include business advisory around growth strategies, profitability and systems implementation, as well as business regulatory compliance. Copyright 2021. Collins Hume Ballina and Byron Bay

On 1 January 2021, new laws came into effect that introduce a new, simplified debt restructuring and liquidation framework for small business. Drawing on key features of the Chapter 11 bankruptcy model in the United States, the new system aims to speed up the insolvency process, reduce costs and where possible, restructure to help the business survive. Where survival is not possible, it's hoped that the quicker insolvency process will deliver greater returns for creditors and employees. Under previous insolvency laws, the insolvency process treated all businesses the same regardless of size. The new laws step away from the 'one size fits all' model. The simplified debt restructuring and liquidation framework is available to incorporated entities with liabilities of less than $1 million (around 76% of insolvencies are businesses with less than 20 employees) with non-complex debt. The liquidation framework also requires that a company is up to date with its entitlements and tax obligations. The new laws are intended to help manage the tide of insolvencies expected now that the temporary insolvency related relief for financially distressed businesses has ended (the COVID-19 relief measures which protected directors from insolvent trading and raised the threshold for action by creditors, ended on 31 December 2020.) There is no question that the temporary measures in tandem with the stimulus measures such as JobKeeper have kept some 'zombie' businesses afloat. In November 2020, 306 businesses entered external administration compared to 748 in November 2019. In general, the number of insolvencies has dropped by around 200 to 300 each month since March 2020 compared to 2019 figures. Debt restructuring For financially distressed but viable companies, simplified debt restructuring is available. Under this process, the directors resolve that the company is insolvent, or is likely to become insolvent at some future time, and that a small business restructuring practitioner should be appointed. Once a practitioner has been appointed, the directors generally have 20 days to develop a plan that sets out an approach to repay the company's existing debts. Only the company directors can propose a debt restructuring plan to the company's creditors and the creditors have the opportunity to vote on the plan electronically or virtually (previously creditors had to be physically present or appoint a proxy). During this time, the company directors retain control of the business - which is very different to the previous laws where the administrator took control of the company during voluntary administration. To prevent the new laws being abused by phoenixing, a company is not eligible to use the debt restructuring process if a director of the company or the company itself has previously been through this process or the simplified liquidation process. The new laws are also not available where the company has already entered into an external administration process. Streamlined insolvency If a company is not viable (the company will not be able to pay its debts in full within 12 months), the directors can resolve to voluntarily wind up the company and access the streamlined insolvency process. Once the resolution has been passed, the directors have five business days to provide the appointed liquidator with a report on the company's business affairs and a declaration that the company meets the eligibility criteria to access the simplified liquidation process. If the liquidator agrees that the company qualifies for the simplified liquidation process, the creditors are advised of the process that will be adopted. The creditors can reject the approach if 25% or more by value, oppose the process. Streamlined insolvency is designed for companies with relatively simple affairs and is limited to those that have liabilities under $1 million and are up to date with their taxation obligations. It uses the existing insolvency framework but simplifies the interaction with creditors and ASIC. For example, outside of the simplified system, the liquidator may convene a creditor's meeting at any time to keep creditors up to date, find out the creditor's wishes, or to approve the liquidator's fees. The simplified system removes the obligation for a liquidator to convene these meetings with communication managed electronically. And, under the simplified systems the oversight of creditors is limited, creditors for example cannot appoint a committee of inspection to monitor the conduct of the liquidation. There are strict timings that apply to the insolvency process. If you are concerned that your business will not be able to meet its obligations, please contact Collins Hume as soon as possible and we will review the situation for you. Where assistance is required, we can refer you to a qualified insolvency or small business restructuring practitioner.