Creditor’s Statutory Demands – Recent Amendment to Minimum Threshold

You may recall that last year, there was a temporary adjustment to the minimum debt threshold from which a creditor could issue a Creditor’s Statutory Demand (“CSD”) against a company. Last year the threshold was lifted from $2,000 to $20,000 in order to provide some breathing space for creditors during the heights of the COVID-19 pandemic and the amendments expired on 31 December 2020, meaning the threshold reverted to $2,000.

In the personal insolvency space, the comparable process is called a Bankruptcy Notice, and as I reported in January this year, its debt threshold was permanently increased from $5,000 to $10,000, effective 1 January 2021.      

Effective from 1 July 2021, the CSD threshold has followed suit (to some degree) and has been permanently doubled from $2,000 to $4,000.

For context, there was some debate about where to set the threshold, including matters that were addressed in The Treasury’s consultation process publications, including:

• The effects of inflation: according to the RBA’s inflation calculator, the value of a basket of goods valued at $2,000 in 1992 would be worth $3,878 in 2020
• Periodic indexation of the threshold: which could create confusion and lead to out of date information being relied upon when preparing a CSD
• Commercial costs of issuing and defending a CSD: debts around the threshold of $2,000 are borderline uncommercial and impractical to both issue and defend    
• Alignment with the CSD and Bankruptcy Notice thresholds: which were aligned for some time until the Bankruptcy Notice threshold was lifted initially to $5,000 in 2010 and more recently, $10,000 as mentioned above    

In practice, most debts will be well above the new threshold; however it is worth keeping this information in mind when advising your clients of their debt recovery options.