Understanding Bankruptcy and Insolvency in Australia
The terms ‘insolvency’ and ‘bankruptcy’ are constantly thrown around in the modern world, especially on television shows and movies. But what do they mean, and how do they affect Australians in such an unenviable position? MGB Public Accountants have a great deal of experience on the subject of bankruptcy and insolvency in Australia and offer a broad range of services to clients across the country.
At MGB Public Accountants, our credentials to discuss these matters are impeccable, and our team has decades of collective experience in the age-old confusion of bankruptcy vs insolvency. If you fear you might be headed inexorably towards severe financial problems, the worst thing you can do is to panic. The stress and burden of handling complex, mounting fiscal issues can be all-consuming and upsetting, but that’s what the experts are here for. At MGB Accountants, you can expect to receive an honest appraisal of your financial situation and bias-free guidance on how best to proceed. If your financial requirements are different, we have the people you need to handle all your financial dealings, including:
- Taxation services
- Business tax planning services
- Corporate compliance/setup
- Financial structuring strategies
- Business scalability
- Small business tax returns
- Business trust formation
- Asset protection
- Advice on partnership/sole proprietorship
- Bookkeeping services
- Business activity statement (BAS) accounting services
- Business structural review and transition
Our expert teams of financial planning advisors in Sydney are situated in several convenient locations, including Wetherill Park, Rosebery, and Campbelltown. As leading authorities in accounting for businesses in Sydney, they are ready to tackle your financial issues and help take the burden of compliance from your shoulders.
Navigating the Legal Landscape: Bankruptcy vs Insolvency in Australia
Before going any further, it is essential to understand the distinctions between bankruptcy and insolvency. Simply put, a state of insolvency is one where an individual cannot pay their debts for whatever reason. Bankruptcy is the legal procedure that follows and allows some of those debts to be written off. Without insolvency, there can be no bankruptcy, but insolvency can exist alone, and bankruptcy never needs to be filed if a debtor can find their way back into the black quickly.
- Insolvency can be considered a distressed economic state.
- Bankruptcy is the legally appointed method of handling unpaid debts, whether by writing them off or enforcing the sale of assets to cover those that remain.
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Critical Steps in Conducting Bankruptcy and Insolvency Assessments
Bankruptcy and insolvency assessments will usually involve one or more of the following procedures:
- Solvency analysis — A solvency ratio is a crucial tool when assessing how well a company can cover its long-term debt and the likelihood of default.
- Cash flow test — A test to assess a company’s ability to pay its debts or sell assets expediently enough to cover them as they arise and become payable.
- Capital adequacy test — This test analyses whether a company has enough capital to support its basic internal operations. It is usually instigated when the initial financial performance of a startup falls short of predictions.
If you require further details on the performance of these tests or any other aspects of bankruptcy vs insolvency, the team here at MGB Public Accountants will gladly discuss them with you.
The Impact of Bankruptcy and Insolvency in Australia
The repercussions of any company or individual sliding into insolvency and filing for bankruptcy can be devastating. Still, there are routes out of the situation if you have the right people by your side. If you wish to experience the benefits of premium accounting services in Sydney, please get in touch with us at your earliest convenience, and we can give you the attention you require. If now is not a good time, we have gathered a collection of the most frequently asked questions we receive and look forward to speaking with you personally later.
FAQ
Insolvency & Bankruptcy
Insolvency is the inability to pay debts; bankruptcy is the legal framework determining this default's outcome.
The Australian Financial Security Authority (AFSA) has a record of all bankruptcy filings available to view online. No specific bankruptcy and insolvency check exists as insolvency cannot be checked in the same way, referring as it does to the state of being unable to pay bills and not legally recorded.
Any bankruptcy filing is noted on the credit record of the business owners and remains listed on the index permanently, even if solvency is achieved. While bankrupt, individuals cannot become directors or managers of another company. Some licences specific to occupations can be affected, and overseas travel is restricted.
At a time when stress levels are already high, navigating the fiscal minefield of insolvency and bankruptcy filing alone can be daunting. Speak to experts like those at MGB Public Accountants, let them guide you, and share the benefit of years of experience.
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