Such proactivity will be especially important, Ms Funston pointed out, given that the Australian Taxation Office is set to chase up outstanding debt.

“The ATO took a considered approach to tax collection during the pandemic so as not to add pressure on businesses already experiencing financial distress. Recent ATO data says that the missing tax gap expected to be collected from 2018-19 is close to $34 billion,” she explained.

“Now that the government’s stimulus packages have ceased and we are back to some operational normality, it is expected that the ATO will begin to move on collections. Coming out of the COVID-19 fog, businesses with a tight cash flow will now be impacted by ATO debt and payment plans, and it will be the straw that breaks the camel’s back for a number of businesses.”

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There is no doubt, Ms Funston mused, that the ATO is “under a certain level of pressure” to collect the outstanding debt, with any recovery program heavily influenced by the state of the economy and the continued use of lockdowns as a means of controlling COVID outbreaks.

This is all against the backdrop, she went on, of the “significant reform” that the restructuring and insolvency space has undergone in recent times and continues to experience.

“As a profession working through the implications of the pandemic, we had to deal with fast-paced reform requiring rethinking on insolvent trading and moratoriums,” she said.

“The industry continues to be under review with the insolvent trading safe harbour provisions introduced in 2017 being considered and the Treasury now looking to improve schemes of arrangements so that they can appropriately support insolvent businesses.

“In my opinion, safe harbour and schemes only apply to a small portion of the market, so I don’t expect to see them driving fundamental change to the industry.”

Over the past 18 months, Ms Funston continued, lawyers in this space have had to create solutions for businesses with the overlay of the complexities and stresses of COVID-19.

“Some complex restructurings, such as Virgin Australia, have proven that the current framework allows for a level of flex and innovation that is able to provide the effective restructure of companies in the interests of their creditors.”

Formal insolvencies are down on average by 50 per cent, she noted, so “change across the board is very likely to occur”, particularly for smaller firms with a traditional focus on creditor-driven insolvency processes.

“This will be driven by the opening up of business post-COVID and related impacts on cash flow.”

When it comes to adapting to the post-pandemic landscape, there is “no doubt”, Ms Funston reflected, that a “post-COVID hangover” is coming for numerous businesses looking to once again open their doors.

“During this period, some businesses have had to downsize or change their offerings. Many businesses will be looking to reposition themselves in the market,” she said.

“A number of industries, such as aviation, tourism and hospitality will be dealing with a significant impact on cash flow, especially the construction industry with their unprecedented shutdown.”

There are five themes for consideration, as Ms Funston sees it, starting with understanding what one’s business looks like. “[It is] critical to understanding the baseline business so you can plan for the future. This includes planning for COVID impacts, understanding what your business model actually is – fully online, bricks and mortar, or a combination? The shift to online is becoming more and more necessary for survival. Some sectors like hospitality will also have to work with the complexities of government changes on occupancy and the fact that a portion of the nation might be complacent for some time yet.”

Secondly, she went on, there are supply chain considerations: “I think everyone can relate to waiting for a parcel from Australia Post during lockdown for what felt like an absolute age, and there are headlines about supply chain interruptions be it timber, pallets, shipping routes or unavailability of critical components.”

Working capital and resourcing are the next two considerations that Ms Funston listed: “[It is] always going to be a challenge for businesses, but understanding working capital needs is going to be very important in keeping businesses open.” The same is true in staffing, she said, as “competition for staff is tight [given how the] loss of international students, workers and backpackers has detrimentally impacted retail, hospitality, tourism and construction”.

Finally, she said, expert advice is “critical” to the success of any business right now.

On the question of how lawyers in this space can and should be supporting businesses, Ms Funston said that while a recent report from fellow BigLaw firm Clayton Utz noted that innovation is on the rise in the restructuring and insolvency space, the existing regime already allows for innovative solutions for Australian businesses.

“The overlay of the global pandemic has meant that there has been increased innovation and thinking taking place,” she responded.

“There has been a lot of talk about the need to ‘reinvigorate’ Australia’s insolvency regimes, adopting the principles found in other countries, such as the US, UK and Singapore, with a shift towards debtor-led (and therefore director-led) restructuring.”

Innovation and adaptation are critical; however, the Australian insolvency regime as its standards allow for innovative solutions, Ms Funston noted.

“The voluntary administration regime is a powerful tool for restructuring an organisation, pandemic or not. The introduction of small business restructuring regimes is a good example of modifying our insolvency systems to meet the needs of the market.”