Coronavirus relief helps Tasmanians pay off debts, lowest personal insolvencies in 30 years
Fewer Tasmanians have gone insolvent and more have paid off debts during the pandemic period, as government support measures temporarily put more money in some people’s pockets.
- New Tasmania’s personal insolvencies were at their lowest in 30 years for the last fiscal year
- Debt Collection Firm Sees More Tasmanians Capable of Proactively Paying Off Debt
- Financial stress is feared to intensify as government stimulus and support measures are canceled
But some fear that as these measures dry up over the next few months, more Tasmanians will face financial hardship and more local businesses will find themselves.
Compared to other states and territories, the Tasmanian government has been more generous in its support to households and businesses, with support measures equivalent to about 3.5% of the planned gross state product, found the economist Saul Eslake.
The national average is closer to 2%.
State programs have included rent relief, utility bill relief for businesses, school tax relief, and taxi license fee waivers.
The JobSeeker supplement and the federal scheme allowing early access to retirement pensions have also relieved many people.
Jenny Sparks is the Managing Director of the Tasmanian Collection Service debt collection agency.
She said that while many Tasmanians were still in dire financial straits, some who had received government stimulus payments or were able to access their retirement pension early, could pay off debts for the first time.
“And so there was more willingness to pay, especially when there was a small debt, they had the ability to erase it.”
Ms Sparks said there had been little debt collection during the pandemic period, with many councils hanging on rate debt collection.
“Many companies have decided now is not the time to go into debt, and so too have government departments understood that consumers have been hit hard and that it is not appropriate for them to go into debt during this time. period.”
Personal bankruptcies drop to their lowest level in 30 years
Tasmania has seen a significant reduction in personal bankruptcies over the past fiscal year and during the first part of that fiscal year.
The Australian Financial Security Authority (AFSA) publishes personal insolvency data, including bankruptcies, debt agreements and personal insolvency agreements.
AFSA Deputy Managing Director Gavin McCosker said nationwide personal bankruptcies were down 23% last year, and in Tasmania they were down 26%.
“Which was the lowest level since 1989-1990,” McCosker said.
He said new personal insolvencies for the first quarter of 2020-2021 (July to September) were down 50.9% nationally and down 62% in Tasmania.
When it comes to corporate bankruptcies, ASIC figures show that 26 Tasmanian companies went into external administration last year, roughly half of the 2018-19 number.
Travis Anderson, of Deloitte’s Restructuring Services, said the same cash flow boosting measures that helped individuals and businesses pay off debts also helped them avoid insolvency.
He said business protection measures had also helped.
“So one example is a moratorium on insolvent transactions, which is due to expire on December 31, along with other protections that prevent or slow down creditors from suing their debtors in insolvency proceedings. “
The government has temporarily increased the debt threshold required for creditors to seek notice of bankruptcy against a debtor from a limit of $ 5,000 to $ 20,000.
Debtors also now have six months to respond to a bankruptcy notice, instead of 21 days.
Fears of further bankruptcies, rising debt as protective measures dry up
But there are concerns about the future of Tasmanian businesses and the impact on individual debt and insolvencies when government safeguards reverse.
The bi-weekly coronavirus supplement for JobSeeker beneficiaries went from $ 550 to $ 250 at the end of September, and it is not known what will happen to this payment after the end of the year.
The federal government reduced JobKeeper from $ 1,500 to $ 1,200 per fortnight for full-time workers, with a further reduction in January until the program ends in March.
Temporary bankruptcy and insolvent trade measures will cease at the end of the year.
The federal government is considering an overhaul of the bankruptcy law, but has yet to release full details.
In Tasmania, state government emergency measures to stop rental evictions and freeze rent prices end in December.
Adrienne Picone of the Tasmanian Council of Social Services (TasCOSS) said that many people who had been better off under the government’s coronavirus support measures may soon find themselves facing debt and insolvency issues again.
“Growing financial difficulties and rising personal debt will be one of the great sleeping giants of this pandemic, especially as we enter the period of recovery,” Ms. Picone said.
“As we see these supports being taken away, that’s when people will really start to take it the hard way.
Travis Anderson said it is clear that debt is mounting in the Tasmanian economy.
“In addition, there are companies that [might have become insolvent], the 50 percent that have not been the subject of insolvency proceedings in the past six months or so, “he said.
“We certainly expect that by the middle of next year there will be an increase in the level of insolvencies as a result of this.”
Jenny Sparks expects more debt to be pursued in the coming months.
“I think the lack of debt collection activity over the past six months has taken its toll on business,” she said.
“And while it was appropriate for the government to postpone the ongoing debt prosecution, I think it also recognizes that there is an obligation for taxpayers to collect this money now.
“So we are certainly preparing for what we think will be a very busy time.”