On 6 August 2026 the Government released its response to the Parliamentary Joint Committee’s report, Corporate insolvency in Australia. It supports one recommendation, supports 25 in principle and notes two, rejecting none. But most of the work now sits with the Productivity Commission, whose final report is not due until May 2027. For now the existing rules remain, and directors and creditors should plan on that basis.
What the Government said
The Committee’s 2023 report made 28 recommendations, including a comprehensive independent review of Australia’s insolvency laws. The Government has not rejected any of them. Instead, most are to be considered through the Productivity Commission’s inquiry into reducing barriers to business dynamism, which received its terms of reference on 12 May 2026 and lists insolvency frameworks for companies and individuals as a key topic.
The Commission’s interim report is due in November 2026 and its final report in May 2027. Legislation would follow after that. In our view, meaningful change to the insolvency regime is unlikely before 2028.
Why it matters now
Insolvency activity remains high. ASIC data show 14,152 companies entered external administration for the first time in 2025–26, down slightly from 14,722 the year before. Construction (3,472) and accommodation and food services (2,078) again led the figures.
The rules that still apply
- Safe harbour. Directors remain protected from insolvent trading liability while they develop and take a course of action reasonably likely to lead to a better outcome, provided employee entitlements are paid and tax lodgements are up to date.
- Small business restructuring. The process remains available for eligible companies with total liabilities under $1 million.
- Unfair preferences. Liquidators can still recover preferential payments, and since Metal Manufactures Pty Limited v Morton [2023] HCA 1, creditors cannot rely on statutory set-off as a defence.
- Director penalty notices. The ATO continues to issue them. Where lodgements are more than three months late, liability cannot be remitted by appointing an administrator, restructuring practitioner or liquidator.
What directors should do now
- Keep BAS and super guarantee lodgements up to date, even if you cannot pay. It preserves safe harbour and restructuring options and avoids lockdown director penalty notices.
- Get advice at the first sign of sustained cash-flow pressure, not when a demand arrives.
- Document any turnaround plan and the advice it is based on.
What creditors should do now
- Check that security interests are correctly registered on the PPSR.
- Be alert to payments from customers in financial distress. They may later be challenged as preferences, without a set-off defence.
- Lodge a proof of debt and take part in creditor meetings when a customer enters administration.
What to watch
The Productivity Commission’s interim report in November 2026 is the next milestone. We will report on its insolvency recommendations when it is released.
To discuss how these developments affect you, contact Scott D. Taylor on +61 7 3229 9800.
This article is general information only and is not legal advice.
Sources: Treasury — Government response to Parliamentary Joint Committee report on corporate insolvency (6 August 2026); Productivity Commission — Reducing barriers to business dynamism; ASIC insolvency statistics.