A grace period designed to save thousands of businesses from going under during the coronavirus pandemic is being extended until the end of the year.
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Relief measures for businesses in financial distress were due to expire in less than 30 days.
Treasurer Josh Frydenberg and Industrial Relations Minister Christian Porter have decided to keep the insolvency and bankruptcy protections in place until December 31.
They are also extending relief from company directors from any personal liability for trading while insolvent.
"These changes will help to prevent a further wave of failures before businesses have had the opportunity to recover," the pair said in a statement.
"As the economy starts to recover, it will be critical that distressed businesses have the necessary flexibility to restructure or to wind down their operations in an orderly manner.
"The government will continue to help businesses successfully adapt and restructure so that they can bounce back on the other side of this crisis."
The Australian Institute of Company Directors welcomed the extension.
Chief executive Angus Armour said it would give organisations more options to manage the impacts of coronavirus without the pressure to move to formal insolvency or wind up immediately.
"We are six months into a COVID-19 challenge that will extend for 18 months or longer," he said.
"Many businesses will now be able to weather the immediate storm, which in the long-run will be a better outcome for the Australian economy."
Mr Armour said the extension was not a free pass for company directors to shirk their duties around financial liabilities and levels of debt.
"This is an opportunity to strike a path through the crisis and not an invitation to illegally phoenix companies."
The corporate watchdog is bracing for a large number of companies to go into administration once the grace period is lifted.
The Australian Securities and Investments Commission is taking it easy on companies as they struggle with the downturn caused by the pandemic.
In the last two quarters of 2019, there were 3912 external administrations started, while in the first six months of this year 2932 companies entered external administration.
Australian Associated Press
