Submission: Pre-Budget Submission 2025–26
ARITA expresses its disappointment that, despite a rising debate about insolvency in Australia and the Government’s commendable emphasis on productivity growth, little progress has been made in advancing the recommendations of the Parliamentary Joint Committee on Corporations and Financial Services regarding corporate insolvency reform (PJC Inquiry).
To provide clarity on the current state of corporate insolvencies, ARITA reiterates its long-held position: the key metric is not the absolute number of insolvency events but rather the rate—such as the number of insolvencies per 10,000 companies. This approach recognises that as the economy expands, so too does the number of businesses, inevitably leading to a proportional rise in insolvencies. By this measure, there is no indication of a crisis in Australia’s current insolvency levels.
In its submission, ARITA advocates for the following budget measures to address the shortcomings in Australia’s insolvency framework:
- Comprehensive Review of the Insolvency System
A wide-ranging, independent review of Australia’s insolvency laws is urgently needed. The last such review took place 34 years ago.
ARITA believes this review should be conducted by the Productivity Commission, leveraging its existing resources to provide fresh insights and direction for modernising insolvency legislation. If this is not possible, the Government should direct the Productivity Commission as part of is current suite of productivity related inquiries to formally consider the importance of insolvency law reform to economy wide productivity.
- Implementation of Immediate Reforms from the PJC Inquiry
The PJC Inquiry outlined numerous immediate reforms to tackle recognised flaws in the current system, which could substantially enhance efficiency and reduce costs.
ARITA highlights four key priorities:
• Finalising the implementation of the recommendations from the Safe Harbour Review.
• Streamlining the small business restructuring and simplified liquidation pathways.
• Improving insolvency processes for trusts.
• Evaluating the potential benefits of a Public Interest Administration Fund.
These measures would address significant inefficiencies and modernise insolvency processes to better support businesses and stakeholders.
- Correction of Drafting Errors and Anomalies
ARITA and its members have identified numerous anomalies and drafting errors in current insolvency laws, which have been submitted to the Government. Rectifying these issues and implementing the recommendations from the Safe Harbour Review are critical steps to ensure the insolvency framework is clear, fair, and fit for purpose.
ARITA’s pre-budget submission highlights an opportunity for the Government to align its productivity agenda with meaningful reform of Australia’s insolvency framework. By addressing long-standing issues and embracing the PJC recommendations, the Government can enhance economic stability, improve business outcomes, and foster greater confidence in Australia’s corporate landscape.
Read the submission: ARITA Pre-budget submission FY24-25