Debt Options, Thresholds and 2026 Rules
One-year bankruptcy and other reform proposals: what is law in Australia in 2026
The status of Australian personal insolvency reforms as at October 2026, including the lapsed one-year bankruptcy bill, the 2019 debt agreement changes and current proposals.
As at October 2026, the default period of bankruptcy in Australia is still 3 years and 1 day. A bill to cut it to 1 year — the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 — was introduced in 2017 but did not pass and lapsed, so any website or adviser telling you that bankruptcy "now lasts one year" is out of date or wrong. The reforms that did take effect in recent years are the debt agreement reforms in force from 27 June 2019 (3-year term limit and affordability rules), the creditor's petition minimum of $10,000, and the licensing of debt management services by ASIC. Further changes, such as a higher creditor's petition threshold, a longer time to respond to a bankruptcy notice and a shorter period on the National Personal Insolvency Index, have been raised in government consultation, but were not law when this guide was updated. Check AFSA and the Federal Register of Legislation for the current position.
This guide sits under the overview of debt help options.
Timeline of key changes
| When | Change | Status in October 2026 |
|---|---|---|
| 2017 | Bill to reduce default bankruptcy to 1 year and limit some restrictions after discharge | Not passed; lapsed |
| Passed 2018, in force 27 June 2019 | Debt agreement reforms: 3-year maximum term (5 years for home owners), payment-to-income ratio, stronger administrator regulation | In force |
| 2020 | Temporary COVID-19 measures: creditor's petition minimum raised to $20,000 and bankruptcy notice period extended to 6 months | Ended; the minimum is $10,000 and the notice period 21 days |
| From 1 January 2021 | Creditor's petition minimum set at $10,000 (previously $5,000) | In force |
| From 1 July 2021 | Paid debt management and credit repair services brought into ASIC's credit licensing regime | In force; see dodgy debt firms |
| 2025–2026 | Government consultation on personal insolvency reform, with proposals reported to include a $20,000 creditor's petition minimum, 28 days to respond to a bankruptcy notice and a shorter NPII listing | Proposals only; not legislated as at October 2026 |
The 2020 temporary measures and the 2025–2026 proposals are summarised from public reporting; confirm the details and current status with AFSA or the Attorney-General's Department before relying on them.
Why the one-year proposal matters to you now
Some debt firms and older articles still describe bankruptcy as lasting one year. If you plan around that, you may misjudge:
- how long income contributions last — up to 3 years, not 1,
- how long you need trustee consent to travel,
- how long you cannot act as a company director,
- when you can reasonably expect to apply for credit.
The credit reporting rules are separate again: bankruptcy information stays on your credit report for the later of 5 years from the date of bankruptcy or 2 years after it ends, according to the OAIC. See credit reports after a debt agreement or bankruptcy.
What the 2019 debt agreement reforms mean in practice
Before the reforms, some debt agreements ran for 5 years or longer with payments that left people with too little to live on, and a significant share failed. The current rules:
- cap the term at 3 years unless you own or are buying real property,
- limit payments relative to income through a payment-to-income ratio set by ministerial determination,
- require the administrator to certify that the proposal is affordable,
- give AFSA more power to refuse proposals and supervise administrators.
The effect is that some people who would once have been offered a long debt agreement are now told it is unaffordable. That is the rule working as intended, not a reason to look for a firm that will "get it through". Read debt agreement eligibility and thresholds.
How to check the current law yourself
- AFSA's website publishes news on legislative changes, the current indexed amounts and the forms that apply now.
- The Federal Register of Legislation shows the latest compilation of the Bankruptcy Act 1966 and its regulations; the date of the compilation tells you what is in force.
- Parliament's bills pages show whether a bill has passed both houses and received assent.
- Treasury and the Attorney-General's Department publish consultation papers; a consultation is not a law.
- A financial counsellor (1800 007 007) will know about changes that affect your options.
Indexation is not reform
The dollar thresholds for debt agreements, income contributions, vehicles, tools of trade and credit disclosure change every 20 March and 20 September through indexation. Those changes do not need new legislation. A firm saying "the limits changed this month" may be right about indexation; check the amounts in AFSA's indexed amounts table rather than assuming the law changed.
Frequently asked questions
Is bankruptcy one year in Australia now?
No. The standard period is 3 years and 1 day from filing the statement of affairs, and it can be extended to 5 or 8 years. The 2017 one-year proposal did not become law.
Will bankruptcy disappear from the NPII after a set time?
Under current law a bankruptcy record stays on the NPII with no removal date (debt agreement records are removed after 5 years or more under the Bankruptcy Regulations 2021). Shortening the NPII listing has been proposed in consultation, but this was not law as at October 2026.
Has the creditor's petition minimum gone up to $20,000?
Under current law the minimum is $10,000. A $20,000 threshold applied temporarily in 2020 and has been proposed again, but check AFSA for any change.
Sources
- Australian Financial Security Authority — news on changes, indexed amounts
- Federal Register of Legislation — current compilation of the Bankruptcy Act 1966
- Parliament of Australia — bills and their status
- Attorney-General's Department — personal insolvency policy
- National Debt Helpline — free advice
