In a challenging time of rising insolvencies, the Australian Financial Security Authority is charged with applying bankruptcy and personal property securities laws, and delivering both social and economic outcomes.
When Tim Beresford FAICD was appointed CEO of the Australian Financial Security Authority (AFSA) in 2022, his vision was for a robust organisation serving the Australian community. “AFSA plays a vital role in the economy by regulating the personal insolvency system and the Personal Property Securities Register (PPSR),” he says. “We also manage the proceeds of crime. For example, when the Australian Federal Police and the Australian Taxation Office uncovered a $105m tax fraud scheme during Operation Elbrus (2017), our job was to preserve and maintain the criminals’ acquired assets, which included cars, planes and property.”
From punishment to relief
In the 19th century, bankruptcy was seen as a punishment. Today, it’s a way of giving people a fresh start. “In countries without insolvency systems, we see people trapped in dire financial straits and there’s nothing they can do to move on,” says Beresford. “That’s not a good social or economic outcome. It’s also a disincentive for other people to start a business. A strong personal insolvency system facilitates the flow of credit in the economy.”
AFSA says there were 11,644 personal insolvencies in Australia in 2023–24. This is expected to increase by 15 per cent to 13,400 in 2024–25, and a further 11 per cent to 14,950 in 2025–26.
However, Beresford stresses the need to consider the figures in the long-term context. “From 2014–24 the average number of personal insolvencies per year was about 21,000,” he says. “They fell below 10,000 in 2021–22 as a function of the COVID moratoriums [when] everything was put on hold, including people making the decision to enter insolvency. We’re now coming off some of the lowest numbers we’ve had since the late-1980s and slowly heading back towards the mean. The 13,400 insolvencies expected this year is an increase, but still a long way shy of our 10-year average.”
He sees three main factors behind the rise. “There are soft market conditions, with interest rates staying higher than they’ve been for some time. Secondly, the ATO is also actively looking to recover $50b worth of debt. The third driver is the unemployment rate. If it keeps a four in front of it, the rise in insolvencies will continue to be modest. The latest figures from the Reserve Bank indicate unemployment will rise from 4.1 per cent in September to 4.4 per cent by the middle of this year. If it rises to having a five, six or seven in front of it, that will fundamentally change the situation.”
Approaches to debt have also altered in recent years. “The Hayne Royal Commission fundamentally changed creditor behaviour,” says Beresford. “Before, creditors were much quicker to put people into insolvency. Now, they’re actively working with debtors through hardship schemes, interest rate holidays and other mechanisms in a bid to avoid that. At the same time, debtors are more likely to reach out for that help, as they learned to do during COVID, rather than doing nothing.”
Securing assets
The PPSR can mitigate hardship by establishing ownership of assets in cases of insolvency. The only federated and fully digitised secured transactions register in the world, it holds registrations with an estimated economic value of $450b, approximately 20 per cent of Australia’s GDP. Since its inception in 2012, it has had over 26 million registrations and 115 million searches.
“If you have a written agreement with a company to store your tools of trade on a building site while you’re working there, and the owner goes into liquidation, they could end up on the wrong side of the locked gates,” says Beresford. “PPSR registration will prove the tools are yours and you’ll be allowed to reclaim them. The same applies to assets that are offsite, but remain yours until they’re sold, such as goods on consignment in a department store or cattle in a stockyard.”
A PPSR search can also protect purchasers by helping to determine if personal property, such as vehicles, machinery or other goods, has any existing security interests registered against it.
Visibility quest
Beresford’s goal is to make AFSA more visible, modern and contemporary. “The PPSR is a good example of our need for visibility,” says Beresford. “A registration can cost as little as $6, yet many small business owners are just too busy to step back and consider whether their assets are protected in this way. A PPSR search costs $2. We need to be visible to the people who are advising small business owners, such as accountants, financial counsellors, registered trustees and industry groups.”
Beresford has highlighted the need to leverage technology and innovation to establish AFSA as a modern enterprise with the right mindsets, tools and skills. He believes a contemporary regulator is one that uses intelligence in an appropriate way. “The ACCC is an illustration of a very contemporary regulator with impact,” he says. “I’m interested to know how we can make some of those disciplines and approaches fit for purpose for our organisation.”
Socio-economic outcomes
Beresford, who has a strong commitment to social justice and is former chair of The Benevolent Society, says his “happy spot” is delivering both social and economic outcomes. “AFSA really does play in that intersection. If you look at the personal insolvency system, for example, it involves sole traders and business partnerships, as well as individuals. About 50 per cent of the debtors under our regulatory oversight have debts less than $50,000. In the scheme of the system, it’s not a significant amount of money, but it can represent a great deal of grief and vulnerability. Yes, some people are reckless, but a significant number have just fallen on really tough times, often through no fault of their own. They may have lost their job or their partner, or be suffering from poor mental health. We also see societal and cultural factors at play, such as domestic violence and financial coercion. Our aim is to help people navigate that hardship so they can have a fresh start.”
One of the bankruptcy and insolvency reforms the Attorney-General is currently considering is the Minimal Asset Procedure (MAP).
“In instances where people enter insolvency with low debts and assets, there’s little or no return for creditors,” says Beresford. “New Zealand and Scotland have MAPs, which people in this situation can take advantage of once in their lifetime. The process takes one year rather than three, and according to their experiences, it has the potential for positive social and economic outcomes.”
Strong credit system
Beresford believes Australians should trust the regulatory system. “At one end of the bell curve, we need to be prepared to take strong action to stamp out poor behaviour,” he says. “For example, our allegations that Queensland lawyer Beau Hartnett deliberately and wilfully misused the system have now reached the Federal Court.” (On 26 August 2024, the Inspector-General in Bankruptcy applied to the Court to set aside a personal insolvency agreement protecting Hartnett from bankruptcy.)
“At the other end of the bell curve, where there’s system vulnerability, we’re offering guidance on dealing with issues such as problem gambling.”
At the middle of the curve lies system efficiency. “How can we make it easier for people to comply?” says Beresford. “We take the ATO’s progress as an example — filling in a tax return is so much simpler than it was 10 years ago and we’re determined to make our systems as effective as possible. I’m committed to achieving the best outcomes for Australians. For me that means striving to be genuine and caring in our interactions and being seen as firm and fair.”
This article first appeared under the headline ‘Picking up the pieces’ in the February 2025 issue of Company Director magazine.
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