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No 1 Year Bankruptcies For Now

Updated: Feb 4, 2021


collapsed piggy bank

At the most recent instalment of the de Jonge Read Seminar Series we discussed the Bankruptcy Amendment (Enterprise Incentives) Bill 2017. The bill proposed that the term of bankruptcy be reduced from three years to one year. It would be fair to say that the main driving force behind this bill was former Prime Minister, Mr Malcolm Turnbull.

At our seminar we discussed the possible lack of support for the bill given leadership changes within the Government. While the proposed amendment to the Bankruptcy Act 1966 started with a great deal of fanfare, by the time Mr Scott Morrison became Prime Minister, this fanfare had died down to a bit of a whimper.

Now, to the surprise of none, the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 has lapsed. When a bill lapses in this fashion it cannot be revived or reinstated. Should there be any push to introduce one-year bankruptcy a brand new bill will need to be introduced and move through the various stages to become legislation.

The stated intent behind one-year term was to reduce the stigma associated with bankruptcy and to encourage more entrepreneurship. So, it follows that at that time the thinking was that the prospect of three-year bankruptcy was stifling entrepreneurship. Frankly, this always seemed a bit of a weak and tenuous argument. It could easily be argued that there are whole range of other laws and regulations that stifle entrepreneurship to a greater extent than the term of bankruptcy. Entrepreneurs, by nature, are often passionate about their endeavours and risk takers. How many of them would even think about the term of bankruptcy when they set out on their new, exciting venture?

It is possible that the proposed legislation will be introduced at some point. However, given the changes within Parliament we believe this is unlikely. It may be some time, and a lot of water pass under the bridge, before there is a serious discussion about reducing the term of bankruptcy again.

Read more from Parliament's website: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=s1097

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