Table of Contents
Impact of COVID-19
Impact on Australian Individuals and Families
Impact on Business
Reforms in Insolvency Legislation
Threshold Limits and Time for Compliance
Powers of the Treasurer
The novel coronavirus popularly known as COVID-19 originated from capital of Hubei Province in China. As of now, more than 210 countries have reported around 28 million cases worldwide. The outbreak of this draconian disease has horrified people living the country and in the entire world. Not only is the death toll rising due to this disease but it also significantly affects the economic costs. Disruption of supply chains, significant decrease in demand and negative cash flows has disturbed the viability of businesses globally leading to bloodbath in the market. Various legal questions arise while dealing with this outbreak and the impact it has on the Australian economy. Seeking answers to these questions is very difficult at this juncture where uncertainty exists in the market.
Being a democracy using Westminster form of administration, Australia has by far been very successful in confronting the issues posed by COVID-19 and decreasing the spread of the same (Ritchie & Roser, 2020). The driving force behind the control of this outbreak is the combination of factors such as national treasury, topographical isolation and firm system of government. However, the pandemic has severely impacted the business enterprises in the country and has resulted in business shut down. This puts an obligation on the State to protect the business community in the country by taking measures to ensure that trade continuity is maintained. One such legislation which has been reformed by the Australian Government is the Insolvency and Bankruptcy legislation. This study explains the effect of novel coronavirus on Australian economy and people residing in the country. It also seeks to explain the changes or reforms made by the Australian Government in the current business laws of the country for welfare of the affected business enterprises. (Australian Government, 2020a)
The novel coronavirus outbreak has posed unprecedented challenges for both people and businesses. The administration of various countries has taken number of measures to protect the business enterprise by focusing on cash flow and supply chains. This draconian disease has made a significant impact on the economy and on lives of the people. Around 16 percent of the people living in Australia are at a risk of being infected by it as this percentage includes people above the age of 65 years. The least affected group constitutes children below 15 years of age which makes around 18 percent of the total population of Australia. (Australian Bureau of Statistics, 2019) In total, infection rate in people above 60 years of age constitutes 30.30 percent. 96 out of 100 deaths in Australia occurred in this age group. The remaining deaths were among people aged around 40 years. (Australian Government, 2020a) Fortunately, no death has been reported from age group of 0-15 years which means that 18.7 percent of the people residing in the country are safe. (Australian Government, 2020a)
The above reported figures do not demonstrate contrasting rate of infection of this disease across class, race or sex, there is other proof that COVID-19's impact has varied across social gatherings. Individuals who were at that point poor, jobless or underemployed, with significant levels of loans on their head, enduring homelessness, or confronting existing challenges with getting access to hospitals and social administrations, and individuals with disabilities, were probably going to be additionally underestimated by expanded weakness to both physical and mental sickness. (Friel & Demaio, 2020) Simultaneously, not for profit organizations and charity trusts were constantly threatened by economic conditions. Their ability to raise funds in these tough times is hampered by the pandemic. (Philanthropy Australia, 2020) Novel coronavirus has affected various people from different backgrounds. People from various cultural backgrounds were also taken by the rumors to treat corona positive patients by using home remedies such as salt water, whiskey, ginger, garlic etc. Some people were of the view that religious deities will protect them from this draconian disease. The people involved in such thought ignored the guidelines and regulations of the government. (SBS, 2020)
According to a report of Australian Bureau of Statistics, 68 percent or approximately two-third of the population had health problems due to the spread of coronavirus while many were taking precautions according to the guidelines of the government. While there was lockdown in the country, 12 percent people from the employed masses used to work more than they usually do and 24 percent used to work less. This work is measured on hourly basis. (ABC, 2020a) Due to the pandemic, the global economy fell as a result of which the many lost their jobs. People became anxious about protecting themselves from the disease and securing their jobs. On 14th May, 2020, it was revealed that unemployment rate in Australia had arisen in the month of April by a sharp 6.2 percent as due to the economic conditions, Australia shed 594,300 jobs. (Cranston, 2020) The social impact of the pandemic can be measured by the number of calls received on the 24 hour counseling service provided by the Australian Government in the name of LIFELINE. 2500 calls were received by LIFELINE every day when Australia was burning in forest fires and the service received 3000 calls per day in the times of coronavirus. (Medhora, 2020)
Family Violence on the other hand has increased more than ever. According to a social group established in New South Wales in the name of ‘Women’s Safety NSW’, there is 40 percent increase in the number of domestic violence cases in the country. The Commonwealth Government allocated a surplus amount of $150 million for providing domestic violence support services to victims of domestic violence. (Carlton, 2020) Simultaneously, disputes related by parenting also increased by 39 percent according to the observation of Family Court of Australia. The Federal Circuit Court has reported 23 percent rise in the same issue. Women’s Legal Services has been advised by the Family Court to take care of the increasing numbers. (Family Court of Australia, 2020)
It is estimated that unemployment rate in Australia is going to rise at 10 percent in the year 2020 and it will almost take two years to reduce this rate to 6 percent. (Reserve Bank of Australia, 2020) However, the demand of the essential product increased due to ‘panic buying’ resulting in increase in employment rates. (ABC, 2020b) 41 percent of the businesses reported that their revenue decreased in the month of August. 47 percent businesses reported the same in the month of July. The industry in which there is extreme loss of revenue is Retail trade. There is decrease in revenue in the Retail Trade to the tune of 56 percent. However the revenue in education and training sector has increased to 30 percent. Two-third of Australia’s businesses were in losses in June, 2020 where the most decline in revenue was witnessed by the education sector by an enormous 87 percent. As a result of COVID-19, cash flow has consistently decreased to a sharp 66 per cent. Operating expenses too saw a decline of 22 percent. As of August 2020, 70 percent businesses in Australia were operating under modified conditions. Business related to support services and administrative services saw a decline in the number of employees and staff members to the tune of 22 percent.
The methods used by various businesses to respond to this condition were as follows:
Around 60 percent of businesses have taken external advice about their businesses in the draconian times of COVID-19. These advices were taken from Federal and State Government Agencies on the topics relating to Compliances of Government regulations and rules, Health measures, Management of business, etc.
In the Commonwealth of Australia, the responsibilities of the Commonwealth, State and Territory Governments are divided. This has been provided by the Constitution itself. For combating coronavirus pandemic and maintain coordination among each other, a National Cabinet was formed in March, 2020. (Prime Minister of Australia, 2020a) Australia and various other nations in Europe have reacted quickly to the difficulties presented by the COVID-19 pandemic to different members under the relevant insolvency and bankruptcy law systems. Switzerland, Spain and Australia have incidentally suspended insolvent trading standards for example the directors of the company can proceed with the business of the organization in spite of decrease in income/cash flow debt circumstance due to the effect of COVID-19. On 22nd March, 2020, the government of Australia passed temporary relief measures by amending the Corporations Act, 2001 and the Bankruptcy Act, 1966. This step was taken by the Federal Government to combat the challenges posed by coronavirus otherwise making the business operations viable and profitable. These changes are contained in Schedule 12 of the Coronavirus Economic Response Package Omnibus Act, 2020 (Cth). The changes are as follows (Prime Minister of Australia, 2020b):
Till 6 months from 24th March, 2020 a temporary relief has been provided to the directors of the companies. Relief is provided to the directors from their obligation to restrict the organization from trading while it is insolvent in regards to debts sustained in the normal course of business. It streams that personal liability cannot be imposed on the directors for such obligations/ debts as would typically be the situation under the ordinary insolvent trading framework. It is trusted that this will give directors and businessmen certainty to carry on trade practices, to the most possible degree, during this uncommon times. The administration has clarified that this alleviation only and specifically relates to debts and obligations to pay brought about in the standard course of business and not where unscrupulousness and misrepresentation are involved.
The government of Australia has given an impermanent increment to the sum needed to issue a Statutory Demand against an organization and a Bankruptcy Notice against an individual person. This has been done for both individual and corporate insolvency matters. Time limit has also been increased by the government within which the person or the company or any business enterprise has to comply with the demand raised statutorily and also with the notice of Bankruptcy. Below are the new transitory changes:
Notwithstanding the above mentioned, time frame has also been changed to the extent where a debtor announces his wish to introduce a debtor's petition. Presently, there is a time of insurance for the debtor of 21 days before which an unsecured creditor cannot make recovery of debts. In accordance with the other expansion of time frames, this security has also increased to six months. The Government did this to grant debtors considerable amount of time to choose the best option for their protection.
The Corporations Act, 2001through Section 1362A provides regulatory relief to the Treasurer for a short term to those classes of people who by some reason or other cannot fulfill their obligations under the Act or Corporations Regulations of 2001. This is done by:
The Australian Securities and Investment Commission (ASIC) is vested with the power to provide relief to companies from complying with the statutory requirements or obligations under the Corporations Act, 2001. For this purpose, the company needs to apply for such relief by submitting an application to ASIC. In such a crisis, the companies may not be able to determine such applications and submit them. Due to this, the Treasurer has been provided with the power to provide such relief to enable companies or persons to comply with the above requirements and obligations.
The Federal Government has put an obligation on the Australian Tax Office to provide solutions to those companies and businesses that are struggling due to the pandemic. These solutions may include reduced payment or deferred payments, enforcement actions are at halt such as notices regarding penalty of directors and winding up notices.
Small and medium enterprises, which are the "existence blood" of the economy, need each sort of help conceivable to give them any possibility that they will have the option to survive the cataclysmic economic effect of the Coronavirus. The speed at which the Federal Government is giving the impermanent legitimate reliefs, related to the financial benefit package, is to be praised. It is positive that there may also be a degree for additional correlative relief to be given, as the phenomenal social and economic circumstances keep on changing rapidly.
ABC. (2020a). Aboriginal Territorians are ‘significantly represented’ in disease outbreaks, but not coronavirus. Available at https://www.abc.net.au/news/2020-05-04/coronavirus-ntaboriginal-outcomes-show-lessons-for-future/12188762.
ABC. (2020b). Coronavirus pandemic means some Australian workers are busier than ever. Available at https://www.abc.net.au/news/2020-04-12/coronavirus-work-for-truck-driverssupermarket-workers-cleaners/12142448.
Australian Bureau of Statistics. (2016). Australian demographic statistics. Available at https://www.abs.gov.au/ausstats/abs@.nsf/0/1CD2B1952AFC5E7ACA257298000F2E76?OpenDocument.
Australian Government. (2020a). Coronavirus (COVID-19) current situation and case numbers. Available at https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncovhealth-alert/coronavirus-covid-19-current-situation-and-case-numbers .
Australian Government. (2020b). How are schools funded in Australia? available at https://www.education.gov.au/how-are-schools-funded-australia .
Carlton, A. (2020). The terrifying rise of domestic violence in isolation. Available at https://www.marieclaire.com.au/domestic-violence-isolation-covid-19.
Cranston, M. (2020). Nearly 600,000 jobs lost in a month, financial review. available at https://www.afr.com/policy/economy/jobless-rate-hits-6-2pc-20200514-p54sub.
Family Court of Australia. (2020). Media release - The courts launch COVID-19 list to deal with urgent parenting disputes. Available at http://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/about/news/mr260420.
Friel, S., & Demaio, S. (2020). COVID-19: Can we stop it being this generation’s great depression? Insight. Available at https://insightplus.mja.com.au/2020/14/covid-19-can-we-stop-itbeing-this-generations-great-depression/.
Medhora, S. (2020). Calls to Lifeline jump 20 per cent as coronavirus crisis takes hold. Australian Broadcasting Corporation. Available at https://www.abc.net.au/triplej/programs/hack/calls-to-lifeline-go-up-due-to-coronavirus-covid-19/12096922.
Philanthropy Australia. (2020). Australian Philanthropy’s response to the COVID-19 crisis. Available at https://www.philanthropy.org.au/tools-resources/news/australian-philanthropysresponse-to-the-covid-19-crisis/.
Prime Minister of Australia. (2020a). Address, national press club. Available at https://www.pm.gov.au/media/address-national-press-club-260520.
Prime Minister of Australia. (2020b). Media release. Available at https://www.pm.gov.au/media/advice-coronavirus.
Reserve Bank of Australia. (2020). An economic and financial update. Available at https://www.rba.gov.au/speeches/2020/sp-gov-2020-04-21.html.
Ritchie, M., & Roser, H. (2020). Our world in data. Oxford Martin School, University of Oxford. Available at https://ourworldindata.org/coronavirus-data .
SBS Radio. (2020). COVID-19: Financial assistance, job support and health waivers now available for international students in Australia. Available at https://www.sbs.com.au/language/english/covid-19-financial-assistance-job-support-and-health-waivers-now-availablefor-international-students-in-australia.
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