Changes to Debt Agreements provide greater protection for financially vulnerable

July 11, 2019 Roger Blow

Following on from last year’s legislative reforms to the Bankruptcy Amendment (Debt Agreement Reform) Bill 2018, a number of changes have recently been introduced to debt agreements.

Debt agreements were introduced as an alternative to bankruptcy and can be a flexible way to come to an arrangement to settle debts without the additional requirements and formalities associated with bankruptcy. The legislative changes are set to provide greater protection for financially vulnerable people who are entering into legally binding debt agreements that they perhaps cannot afford.

The main changes include:

Limiting the length of a debt agreement;
Eligibility requirements to enter into a debt agreement;
Increased investigative powers of the Inspector-General to address misconduct with respect to debt agreements and debt agreement administrators;
Use of a registered debt administrator or registered trustee to administer a debt agreement (cannot self-administer);
Increased protections against debt agreements that cause financial hardship.

The changes came into effect from 27 June 2019. People currently in debt agreements will not be affected by the changes.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action. If you are attempting to address director personal liability issues, director penalty notices, garnishee orders, winding up applications, statutory demands or need advice on an insolvency situation generally, speak to us today.

Roger Blow, Principal, P: +61 8 6381 0326 or E: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

New Director ID laws proposed

April 11, 2019 Roger Blow

It is being proposed that all existing and future directors of registered corporations be required to apply for a permanent identification number which will keep track of their various directorships.

The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 proposes amendments to the Corporations Act 2001 making it compulsory for all newly appointed directors to apply for a unique Director Identification Number (DIN) within 28 days of becoming a director. For existing directors, it is proposed that there will be transitional provisions giving a currently appointed director 15 months to apply for a DIN once the new requirement commences. Those considering becoming a director within 12 months could also apply for a DIN.

With the current system, directors are only required to lodge their details with ASIC but there is no process in place to verify their identity. The new requirements will improve the traceability of a director’s relationship across all companies and allow the regulators to quickly investigate a director’s involvement in what may be repeated unlawful activity, in particular illegal phoenixing.

There will be civil and criminal penalties introduced for directors who do not have a DIN or that fail to apply for a DIN within the applicable timeframe. A director also commits an offence if they knowingly apply for multiple DIN’s or misrepresent a DIN to a registered body or government agency.

Whilst the draft legislation was introduced to Parliament in February, experts recommend that companies prepare for its enactment. We will keep you updated on its progress.

Cove Legal provides legal advice on a wide range of commercial issues. We specialise in dispute work, but Principal Roger Blow’s 20+ years working in some of the largest commercial law firms allows us to address a wide range of client legal needs with fee structures that are tailored to the commercial issues being addressed. Give us a no-obligation call to see if we can help.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au

Garnish*

December 5, 2018 Roger Blow

* Verb
1 decorate or embellish
2 serve notice on a 3rd party to seize money

A garnishee notice is served on a third party that owes you money (or holds money on your behalf), requiring that the third party pays some or all of that money direct to the entity issuing the notice. In recent years it has increasingly become one of the ATO’s favourite weapons to enforce the payment of outstanding tax debts.

This can include the diversion of wages owed to you by your employer, the contents of your bank accounts, proceeds of sale held by a property settlement agent or amounts owed by trade debtors.

Unlike your average creditor, the ATO does not need to seek a court order to issue and enforce a garnishee notice. You do need to be served with a copy of the notice.

If you are in the process of a court or AAT appeal in which you are disputing the assessment under which you owe the tax debt, then the ATO is required to consider whether garnishing funds would prejudice your ability to pursue the appeal. Recent case law suggests that this assessment by the ATO is at times open to challenge, as the taxpayer (and the Courts) may not always agree with the ATO’s assessment as to what will or will not prejudice the taxpayer’s capacity to address their tax appeal. We have also seen cases where garnishee notices have been improperly issued against joint bank accounts concerning individual debts – so the issue of a notice is not always the end of the story. Call us if you would like any further help in addressing a garnishee notice.

Cove Legal are experts in assisting clients with contentious tax matters and insolvency proceedings. We provide advice on ATO payment plans, director penalty notices, winders and all other aspects of ATO debt recovery action. Practice Director Roger Blow has acted extensively on behalf of the ATO in Perth and has specific expertise in tax related disputes.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au