Clarifying the treatment of trusts under insolvency law

As part of the 2021-22 Budget, the Government committed to consulting on clarifying the treatment of corporate trusts under insolvency law.

Australia’s current corporate insolvency regime does not expressly cover how companies which structure themselves through a trust, or businesses which have a corporate trustee (‘corporate trusts’), are to be dealt with during insolvency. Corporate trusts are commonly used by small businesses.

The Government is seeking stakeholder views on whether the treatment of corporate trusts in Australia’s insolvency law needs to be clarified. Input is also sought on the benefits this could deliver and how any new framework might operate.