What you need to know
- The Government released its response to the Parliamentary Joint Committee's (PJC) Corporate insolvency in Australia report on 6 August 2026, three years after the PJC tabled it.
- Of the 28 recommendations, the Government supports 25 in principle, notes 2 and supports 1. It rejects none.
- The PJC's central recommendation, a comprehensive independent review of corporate and personal insolvency law, has not been taken up. This is disappointing. The Government instead points to the Productivity Commission's (PC) business dynamism inquiry. We do not consider that this is the best forum for restructuring or insolvency law reform.
- For most recommendations, the response states only that the PC "may" consider the matter. The Government has not directed the PC to examine any particular recommendation.
- The PC's terms of reference are framed around business entry, expansion and exit. Liquidator remuneration, practitioner independence, creditor priority, unfair preferences, corporate trusts and franchise insolvency do not appear in them.
- Four workstreams continue outside the PC inquiry: technical safe harbour amendments already enacted, three updated ASIC regulatory guides, the Whittaker Review on the PPSA and possible FEG integrity reform.
- The PC delivers its interim report in November 2026 and its final report to Government by May 2027. Reform arising from that process is unlikely to take effect before 2028. Only a full blown recession will spark the call for genuine reform – that will be too late.
Background – what the PJC found
The PJC commenced its inquiry into the effectiveness of Australia's corporate insolvency system on 28 September 2022 and tabled its report to Parliament on 1 August 2023. It found the system to be overly complex, difficult to access, and a source of unnecessary cost and confusion for debtors and creditors alike. Unsecured creditors pointed to persistently low returns, smaller businesses to a lack of viable restructuring options and practitioners to inadequate resourcing.
The PJC traced much of this to the piecemeal way insolvency reform has proceeded since the Harmer changes of the early 1990s. Individually sensible amendments have been made without regard to the whole, adding complexity and inconsistency. The PJC's answer was a comprehensive, independent review of the insolvency system covering both corporate and personal insolvency – the first since the 1988 Harmer Report.
In its final report, the PJC split its 28 recommendations into two categories. Seventeen set out the topics a comprehensive Government review should examine (recommendations 2, 3, 5, 6, 7, 9, 11, 13, 14, 15, 18, 19, 20, 21, 23, 25 and 27). The other thirteen were near-term actions – the "low hanging fruit" of reforms addressing clear and broadly recognised failings in the current law, which the PJC said should proceed independently of the review. Recommendations 7, 15 and 19 appeared in both categories, each requiring a near-term response and a response in the context of the comprehensive review.
The Government's response
The PJC's central recommendation, a comprehensive independent review of the insolvency law (recommendation 1), has not been taken up by the Government. Rather than commission the review, it points to the PC's current business dynamism inquiry and says that it intends to defer consideration of the PJC's near-term recommendations so they can be considered alongside the PC's recommendations.
Three features of that approach matter.
- PC inquiry has a different scope. The terms of reference of the PC are significantly different from those of the PJC. The PC generally investigates regulatory barriers to business dynamism and is oriented to business entry, expansion and exit. Insolvency appears once in the scope of the inquiry through two specific lenses – whether greater harmonisation of the corporate and personal systems deliver net benefits, particularly for small business owners navigating both, and whether the insolvency framework supports efficient allocation of resources while preserving integrity and deterring corporate misconduct. The PC is also to review the operation of Schedules 1, 3 and 4 of the Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020 (Cth).
Notably, however, liquidator remuneration (recommendation 13), practitioner independence (recommendation 14), creditor priority (recommendation 23), unfair preferences (recommendation 27), franchising insolvency (recommendation 25) and corporate trusts (recommendation 28) do not appear in the PC terms of reference.
- PC "may" consider. A recurring formula used in the Government responses to the PJC's recommendations is that the PC "may" consider the recommendation. The Government tasked the PC with a more limited scope in relation to its review of insolvency law and the PC will consult publicly. Beyond that, whether any particular recommendation of the PJC is adopted is a matter for the PC.
- Delayed timing. Even if the recommendations of the PJC are eventually adopted by Government, any consideration is likely to be delayed beyond 2027 – 2028. This is because the PC final report is scheduled for May 2027.
What has been delivered
Although progress on the bulk of the PJC's recommendations has been deferred, the Government has already responded to some of the recommendations and some workstreams continue independently of the PC inquiry. These welcome reforms are as follows:
- Safe harbour. The Government has already implemented certain amendments to the safe harbour provisions via the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (Cth), which clarify the operation of these provisions.
- ASIC guidance. ASIC has substantially refreshed its guidance resources including RG 217 (Duty to prevent insolvent trading: Guide for directors), RG 258 (registered liquidator registration and obligations) and RG 16 (reporting possible offences and misconduct) to address certain of the recommendations. ASIC also changed its forms and processes during 2025 to reduce the reporting burden on registered liquidators.
- PPSA. The Government released its response to the Whittaker Review of the Personal Property Securities Act 2009 (Cth) on 22 September 2023 and has consulted on amendments to the PPSA and regulations. The Government says that further work on this matter will be announced in due course. However, there has been little obvious movement on these reforms since late 2023.
- Fair Entitlements Guarantee. The Government is considering reforms to address potential misuse of FEG following consultation in early 2025 which could be implemented independently of the PC inquiry.
The Government has also left open targeted changes to the small business restructuring and simplified liquidation pathways "in parallel" with the PC's work, though it identifies no specific change.
Summary of status of near-term recommendations
| Rec | Near-term action | Position after response |
|---|---|---|
| 4 | ASIC to collect high quality, granular insolvency data | Deferred; ASIC encouraged to share existing data |
| 7 | Implement Safe Harbour Review recommendations | Partly implemented; remainder deferred |
| 8 | Simplify small business restructuring and simplified liquidation | Deferred; targeted changes possible in parallel to PC inquiry |
| 10 | ASIC to analyse a sample of deregistrations | Recommendation noted; ABRS, ASIC and ATO encouraged to collaborate |
| 12 | Reform liquidator experience eligibility requirements to address gender imbalance | No reform; existing discretion to register despite the experience requirement not being met plus RG 258 guidance |
| 15 | Prompt action to improve regulation and active enforcement of pre-insolvency advisers | Deferred |
| 16 | Changes to the Assetless Administration Fund to ensure it meets its intended policy objectives | Deferred |
| 17 | Assess potential benefit of Public Interest Administration Fund | Deferred |
| 19 | Amend statutory reporting thresholds for reporting requirements for insolvency practitioners | Deferred; however ASIC has since published RG 16 and made changes to its forms and processes to reduce burdens on registered liquidators |
| 22 | ATO to consult on and publish model creditor guidelines | Noted; ATO to consult in due course |
| 24 | Reforms to protect FEG integrity | May proceed independently of the PC |
| 26 | Respond to the Whittaker Review on the PPSA | Delivered to the extent proposed amendments to the PPSA and regulations were published for consultation in September 2023. However, since that time there has been little obvious movement on these reforms. |
| 28 | Improve the insolvency process for trusts | Deferred; Government noted that a legislative framework for trusts with corporate trustees in external administration is an important area of reform that would improve outcomes for distressed companies and their creditors. |
Creditor priority
Apart from the near-term recommendations, a recommendation deserving particular attention was the request for a comprehensive review of the relative priority of employees, liquidators and secured creditors (including priority over circulating assets under section 561 of the Corporations Act 2001 (Cth)) (recommendation 23). This was flagged as a high-priority topic by the PJC which declined to propose a reordering of creditors' priorities given the long settled statutory provisions and the fact that the Whittaker Review did not examine the Corporations Act circulating asset provisions. The Government's response was again to express support in principle for this recommendation and simply note that this matter may be considered in the PC inquiry.
What this means
The Government's response to the PJC's corporate insolvency recommendations was to generally postpone these until the PC business dynamism inquiry has concluded, even those near-term recommendations that the PJC identified as "low hanging fruit".
The Government specifically said that the PC "may" consider the matters identified in the PJC's recommendations. This suggests that the PC inquiry is now the context in which future insolvency law reforms will be considered. It is important to note that the PC's terms of reference are very different to those of the PJC. However, it is likely those submissions that engage the framing of the PC's report (the entry, expansion, exit, and efficient allocation of capital and labour) will receive greater focus than issues touching purely technical insolvency law reform.
The PC's interim report is due in November 2026 and, after that, final submissions will close in December 2026. The report is to be provided to the Government by May 2027 meaning that any proposed insolvency reform that survives that process will likely not come into effect until at least 2028.
Authors: Michael Sloan, Partner; Richard Fisher, Consultant and Alex Chernishev, Expertise Counsel
