TMA Australia has formally lodged its submission to the Productivity Commission's inquiry into reducing barriers to business dynamism in Australia.

Drawing on the experience of our members, the submission outlines practical recommendations to strengthen Australia's restructuring and insolvency framework, including reforms to safe harbour, regulatory burdens and the role of major creditors such as the Australian Taxation Office (ATO). At its core is the principle that early intervention and proportionality should underpin future legislative reform.

We extend our sincere thanks to Genevieve Sexton (Arnold Bloch Leibler) and TMA Director, for leading this important initiative on behalf of TMA Australia. We also acknowledge the significant contributions of Gayle Dickerson, Jason Preston, Paul Apathy, Scott Guthrie, Maria O'Brien and the broader TMA Australia Board, together with our members, whose expertise has helped shape both the submission and TMA Australia's engagement with the Productivity Commission.

While the submission has now been lodged, our member survey remains open. The Productivity Commission has expressed a strong interest in hearing from those who work with, or have interacted with, Australia's personal and corporate insolvency systems. We encourage members to continue sharing their experiences to help inform TMA Australia's ongoing advocacy throughout the inquiry.

Executive Summary

The Commission has identified the design and operation of Australia’s insolvency system, the balance struck by insolvent trading and safe harbour laws, regulatory and administrative burdens, and the role of the Australian Taxation Office (ATO) as a major creditor as matters within the inquiry’s scope.

An effective restructuring and insolvency system is an essential component of a dynamic economy. It should:

• encourage directors to recognise and address financial distress early;
• facilitate the preservation of viable businesses, productive capacity, employment and enterprise value;
• allow capital, labour and other resources to be redeployed promptly where a business is no longer viable;
• provide predictable and fair outcomes for creditors and other stakeholders;
• deter misconduct, illegal phoenix activity and deliberate non-compliance; and achieve those objectives at a cost proportionate to the size and complexity of the business concerned.

Australia’s restructuring framework for larger and more complex businesses is not fundamentally broken. Schemes of arrangement, voluntary administration and deeds of company arrangement, informal workouts supported by the insolvent trading safe harbour, receivership and distressed mergers and acquisitions can, and do, produce sophisticated and value-preserving outcomes. Those processes should be improved through targeted reforms, but they should not be destabilised or deprived of safeguards that are appropriate in large and contested matters.

TMA Australia’s central submission is that proportionality and early intervention should be the organising principles for reform. TMA Australia recommends that the Australian Government:

(a) Promote earlier intervention through safe harbour reform, director education and referral pathways.

(b) Reform the ATO’s role in restructuring, including model-creditor standards and the interaction of director penalty, garnishee and statutory indemnity regimes with genuine turnaround efforts.

(c) Improve rescue tools for larger and complex business, including by implementing targeted reforms to schemes of arrangement and consult on a formal rescue finance regime.

(d) Facilitate distressed business transfers while preserving integrity, including expedited regulatory approvals and clear anti-phoenix guidance.

(e) Create a proportionate framework for SMEs and owner-managed businesses, including better coordination of corporate and personal distress.

(f) Improve system data, public-interest enforcement and legislative coherence, including a comprehensive review.

This submission builds on and should be read with TMA Australia’s submissions concerning schemes of arrangement and safe harbour and the broader recommendations subsequently made by the Parliamentary Joint Committee on Corporations and Financial Services.

Please read the two attachments below:

1. TMA Australia's full submission
2. Helping Companies Restructure by Improving Schemes of Arrangement