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Debt Collection News


At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.

Is It Time To Review Your PPSR Registrations?

Tuesday, October 30, 2018 - Posted by Michael McCulloch

Do you know when your interest on the Personal Property Securities Register (PPSR) is due to expire?

It can be one of the more challenging things that we come across in the debt collection industry. A customer has relocated several times over a number of years however the debt is believed to be secured by an asset which, if repossessed, may finalise the debt or may entice the debtor to enter into a repayment arrangement which is maintained. Upon conducting a search of the PPSR it's then found that the security interest has lapsed. You now have essentially an unsecured debt with very little or no bargaining power.

While many organations used to employ a specialists securities agents this role has gradually been phased out and is now considered a day-to-day role of administration staff who may or may not keep an accurate register and may not know or realise the implications of the interest lapsing especially where a debt has been written-off. If this sounds familiar did you know that if you have a PPSR login that you can generate a report called Registrations Due to Expire?

The report includes information such as:


  • the SPG (Secured Party Group Number);
  • registration number;
  • end date and time of the security interest;
  • collateral type;
  • collateral class;
  • serial number and serial number type; and
  • details of the Grantor

The Registrations Due to Expire Report may be an invaluable report to you to keep track of your interests on the PPSR with reports being available to download in CSV or XML format.

Defendant Defeats Plaintiff in Preferential Payment Claim

Thursday, June 28, 2018 - Posted by Michael McCulloch

In the matter of Heavy Plant Leasing Pty Ltd (In Liquidation) (ACN 151 786 677) [2018] NSWSC 707 (8 February 2018), a Creditor had been applying pressure to obtain payment which was not forthcoming despite several months of requests for payment.

Once the company had been placed in liquidation the liquidator filed proceedings in the Supreme Court, as the Plaintiff (HPL) , against Ms Christine Mancer who trades as Bildavoid Concrete Voidforming Systems (Bildavoid), as the Defendant, claiming to recover $152,609.79 made by HPL to Bildavoid in February 2013. The application was made under the s588FF of the Corporations Act to recover those funds as an unfair preference, insolvent transaction and voidable transaction. The most common way to defend a liquidators claim again unfair preference is to rely on s588FG(2) of the Corporations Act, commonly referred to as "the good faith defence". The basis of the defence is that the Creditor argues that they received monies in good faith and they did not know, or ought not to have known, that the company was insolvent.


In relation to Bildavoid's pressure in which to obtain payment, the Court said, "These are steps that are taken just as much by an unpaid creditor of a solvent debtor as they are by an unpaid creditor of an insolvent debtor. The fact that a creditor applies pressure of that order to secure payment does not, to my mind, illustrate that the creditor fears or apprehends that the debtor is insolvent. The degree of pressure exerted by a creditor does not speak of a suspicion of insolvency, because a creditor is as likely to exert pressure on a recalcitrant solvent debtor as on an insolvent one."

It is important in these matters that if you expect that a company may be insolvent and owes you money that you seek timely advice from a qualified legal practitioner.

Please note that this article is not intended to be legal advice. You should seek your own independent advice from a qualified legal practitioner.

Council to Auction Properties With Overdue Rates

Thursday, March 29, 2018 - Posted by Michael McCulloch

Back in our February 2017 edition of Debt Collection News we reported councils considering home repossessions to recover unpaid rates in the Bowen Basin Local Government area.

This month it is being reported that Bundaberg Regional Council has listed several properties for auction for rate arrears. A council spokeperson said that in November 2017 council authorised a total of 43 properties to be sold at auction representing outstanding rates of just under $475,000. Of the 43 properties only 7 remain however according to Council many ratepayers will settle their debt prior to the hammer falling.

In a statement a council spokesperson said, "Ratepayers who find themselves facing the auctioning of their property have ignored numerous phone calls, letters and approaches from council's debt management team and authorised recovery agency. It is quite normal for the outstanding rates on a majority of properties to be settled prior to auction".

The auction is scheduled for Thursday, 12 April 2018.

Source: NewsMail - March 2018


CIO Releases Credit Reporting Fact Sheet

Wednesday, November 29, 2017 - Posted by Michael McCulloch

The Credit & Investments Ombudsman ("CIO") has this month released a new fact sheet, "Credit Reporting: Enquiries".

The fact sheet covers:

  • What is a credit enquiry?
  • Why would a credit provider need to access my credit report?
  • What information is included in a credit enquiry?
  • Is my consent needed for a credit provider to access my credit report?
  • How long does a credit enquiry stay on my credit report?
  • What if I did not make an application, and the enquiry is incorrect?
  • Do credit enquiries negatively affect my credit report?
  • Can my application be declined because of the information in my credit report?
You can download a copy via our website here.

Is A Bad Debt Tax Deductible?

Thursday, June 29, 2017 - Posted by Michael McCulloch

With the end of financial year soon upon us many businesses will be looking at ways in which to reduce their taxable income.

One way in which you can legitimately do this is to write-off your bad debts prior to 30 June. This will effectively mean you do not pay tax on any income associated with the bad debt as these monies have never been received.

The Income Tax Assessment Act 1997 (Cth)

s25.35 -

(1)  You can deduct a debt (or part of a debt) that you write off as bad in the income year if:
(a)  It was included in your assessable income for the income year or for an earlier income year; or
(b)  It is in respect of money that you lent in the ordinary course of your business of lending money.
Note: If a bad debt is in respect of a payment that is required to be made under a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ): see subsection 63(1A) of that Act.

Writing off a debt you have bought
(2)  You can deduct a debt that you write off as bad in the income year if you bought the debt in the ordinary course of your business of lending money. However, you cannot deduct more than the expenditure you incurred in buying the debt.

Writing off part of a debt you have bought
(3)  You can deduct a part of a debt if:
(a)  You write off that part as bad in the income year; and
(b)  You bought the debt in the ordinary course of your business of lending money.
(4)  However, the maximum that you can deduct under subsection (3) for one or more income years is the amount (if any) by which:
- The expenditure you incurred in buying the debt;
exceeds:
- So much of the debt as has not yet been written off as bad.

Considerations: 

  • Any GST paid on expected income can be claimed as a refund
  • The debt must be considered a bad debt and not doubtful to be written-off.
    A debt is considered bad if, for example, an invoice remains unpaid and you have taken reasonable steps to recover the debt and it is unlikely the debt will be paid.
  • The debtor is deceased and there are insufficient assets in the asset in which to pay the debt
  • The debtors whereabouts is not known and you have undertaken reasonable enquiries in which to locate them and / or their assets
  • The debtor is bankrupt or has gone into liquidation and there will be insufficient funds in which to pay the debt

Using A Debt Collection Agency

As we noted previously in this article there is an onus on you, the business owner, to make reasonable steps and / or reasonable enquiries in which to recover the debt or locate the debtor. Contact us at LCollect to discuss your situation and your options.


Please Note: This article does not constitute legal or financial advice. You should seek your own independent advice from a qualified person.

Important Note: Bad debts will only need to be written-off if you report debts on an accrual basis. If you recognise income in your accounting system only when it's banked into your business account you will not have any adjustments to make as the income has not been recorded.


Australian SMEs Owed More Than $10,000

Thursday, March 23, 2017 - Posted by Michael McCulloch

Approximately 50% of Australian SME's (small and medium enterprises) are owed more than $10,000 in unpaid invoices for goods and services provided with over 63% of those surveyed indicating that they wait more than 90 days before referring debts to a debt collection agency.

Stacey Price, founder of Healthy Business Finances, said, "I think people feel guilty chasing money, even if they've done the work. I think the big thing is that people just assume that people will pay, then they don't chase it until's 30 days beyond the deadline. You're already looking at 60 days before they make contact".

Noted in a prior blog article, the Australian Small Business and Family Enterprise ("ABSFEO") launched their own inquiry with preliminary results indicating that 40% of Australian businesses spend between 2 to 5 hours a week chasing money which is owed to them. They estimate that 2 out of 3 businesses are owned at least $10,000 while 1 in 10 have reported debts owing between $100,000 and $500,000.

Ombudsman Kate Carnell from ABSFEO anticipates that the final report, The Payment Times and Practices Inquiry, will be handed down in the coming weeks and we will be sure to provide an update.

Source: Smart Company - More Than Half of Aussie SMEs Are Up to $10,000 in Debt


Ipso Facto Clauses

Friday, January 27, 2017 - Posted by Michael McCulloch

Ipso facto clauses allow one party to a Contract or Agreement to terminate or vary a Contract typically upon an insolvency event, such as the appointment of a company administrator. This is regardless of continued and historical performance under the contract - ie payments are still being made with no amounts outstanding for payment.

The operation of these clauses diminishes the value of a business when an insolvency event occurs and may reduce the scope for a successful restructure or prevent the sale of the business as a going concern, with consequential impact on the returns to Creditors in any subsequent liquidation. This was particularly the case with the collapse of One.Tel in May 2001 where once ispo facto clauses were invoked, services were unable to be provided.

The lack of protection from the operation of ipso facto clauses has been a key criticism of the voluntary administration regime contained in Part 5.3A of the Corporations Act 2001.

In the 2015 report on Business Set-Up, Transfer and Closure, the Productivity Commission recommended that the Corporations Act 2001 be amended such that ipso facto clauses that have the purpose of allowing termination of Contracts solely due to an insolvency event are unenforceable if the company is in voluntary administration or in the process of forming a scheme of arrangement with Creditors.

For reasons of practicality the Government considers that this approach should be extended to include other types of ipso facto clauses (such as clauses that vary terms of a Contract) which may be disproportionately detrimental to companies undertaking a restructure.

If the recommendations made are implemented later this year there will be a requirement for adequate safeguards to ensure that they are not abused and to protect Creditors however the adoption of the recommendations would provide  a more balanced approach for a company that is undergoing financial distress and lead to a better result for all parties.


Australian Government To Crack Down On Late Paying Large Corporations & Government Departments

Wednesday, November 23, 2016 - Posted by Michael McCulloch

Recent data from a UK based finance company, MarketInvoice, shows that Australian businesses, especially larger corporations and Government departments, are the worst in the world when it comes to paying invoices in a timely manner.

The report, which you can read here, shows that, on average in Australia, it takes 26.4 days for an invoice to be paid. In direct comparison the Japanese are renowned for paying on time and, on average, pay an invoice 6.5 days prior to the due date.

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said in an interview with ABC 702 Breakfast, "[T]hose are the companies that they’ve got a capacity to pay quicker. And yes, they’re doing it because they can, they’re using small business people fundamentally as banks I suppose – very cheap banks – and we just think that’s not acceptable; it's impacting upon on our economy, so we’ve launched today an inquiry into this."

By sector, banks were the the best payers, typically settling their accounts 1 day past the due date with supermarkets and eCommerce merchants paying 7 days after the due date. High-street retailers typically settled their accounts 2 weeks past the due date.

The inquiry, The Payment Times and Practices Inquiry, launched by Australian Small Business and Family Enterprise Ombudsman, aims to possibly introduce regulations that will punish larger organisations that are late paying small business.

You can provide feedback to the Australian Small Business and Family Enterprise Ombudsman via their website.

We will continue to monitor the progress of the inquiry and provide updates as they become available.

Source: ABC 702 Breakfast - Interview With Robbie Buck


Please Provide Your Feedback Into an LCollect Website Redesign

Wednesday, November 23, 2016 - Posted by Michael McCulloch

As part of our continuing commitment to improvement and innovation we are currently in the process of redesigning the LCollect website. Our current site will remain live during this period with no service interruptions.

As the day-to-day users of our website we are seeking your feedback about what we currently do well on our website, what we need to improve and what you would like to see when you visit our site.

You can complete our feedback survey here.

Alternatively please contact us and let us know your thoughts.


s88 Default Notices and Compliance with NCC

Sunday, October 30, 2016 - Posted by Michael McCulloch

It has come to our attention again that some Section 88 Default Notices continue not to be compliant with the National Consumer Credit Protection Act 2009 ("NCC).

While there is nothing within the NCC that stipulates that that you cannot issue a s88 Default Notice for an account being 1 day in arrears the NCC does state that you must allow the debtor 30 days in which to remedy any default as stipulated in s88 (b):

(b)  the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default.

We recommend that you allow a minimum of 35 days for the default to be remedied as this allows 5 days for postage.

To avoid any potential breach of the NCC we recommend that you liaise with an accredited Compliance Manager, Solicitor or contact us here at LCollect to ensure that your Notices are compliant to avoid complications in the future when it comes to enforcing your debt.



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