Treasury is consulting on the draft Treasury Laws Amendment (Personal Insolvency Amendments) Bill 2026, which contains proposed changes to Australia’s personal insolvency system, including increasing the threshold for involuntary bankruptcies and increasing the timeframe that a debtor has to respond to a bankruptcy notice.
The exposure draft would amend the Bankruptcy Act 1966 to:
* increase the involuntary bankruptcy threshold from $10,000 to $20,000 and index it over time;
* give debtors 28 days to respond to a bankruptcy notice, up from 21 days; and
* remove the proposal or acceptance of a debt agreement as an ‘act of bankruptcy’ under section 40(1). Under current arrangements, attempting to negotiate a debt agreement can itself trigger bankruptcy, even when someone is acting in good faith to settle their debts.
The amendments propose that the statutory bankruptcy minimum only increases when CPI movements result in an increase of over $500, rather than increasing on the basis of year-on-year changes.
The Government proposes to amend regulations to end permanent listings on the National Personal Insolvency Index. Under the proposed changes, bankrupts will be able to be removed from the Index after seven years. Bankruptcy usually lasts for 3 years and 1 day.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
