Businesses are bracing for an insolvency ‘‘cliff’’ when Job Keeper ends in three months after changes in bankruptcy laws also kicked in at the start of the year, while border restrictions and COVID-19 outbreaks continue to affect many employers.

The federal government temporarily changed bankruptcy legislation at the peak of the coronavirus pandemic to help employers hibernate through lockdowns. But the insolvency safe harbour rules have now ended and creditors are able to apply for a bankruptcy notice against business when outstanding debts reach $10,000, half of what it was during the peak of the crisis.

‘We are definitely going to see an increase in insolvencies.’

Patrick Coghlan, CreditorWatch chief executive (pictured)

While these changes started from January 1, Creditor Watch chief executive Patrick Coughlan says the end of support measures in March, such as wage subsidy scheme JobKeeper and mortgage deferrals will be the trigger point for many companies.

‘We are definitely going to see an increase in insolvencies,’’ Mr. Coughlan said. ‘‘I don’t think they’ll happening January … I think there could be a March cliff. ’

The federal government has consistently said the wage subsidy scheme was ‘‘temporary’’ and has not committed to any extensions beyond March, but Labor has criticized any reduction in support when the latest outbreaks and border restrictions are not yet resolved. Mr. Coughlan listed the end of Job Keeper, mortgage deferrals and rental protections as among the reasons businesses will find it difficult to make ends meet.

He said the worst of the bankruptcies had likely been avoided by getting outbreaks under control and record-level government spending to keep companies afloat, but there needed to be a reduction in the protections. ‘I think it’s quite good they haven’t extended [bankruptcy safe harbour] again.

We need to get back to somewhat normal trading conditions because we’ve been in such synthetic environment for so long, and rightfully so,’’ he said. However, he said the government needed to remain ‘‘malleable’’ with its approach to supporting businesses particularly with new interstate border restrictions and limitations on businesses to stop the spread in NSW.

‘‘Ultimately, if conditions get really bad again they can reintroduce [safe harbour provisions],’’ he said. ‘‘This puts pressure on companies who were on the edge of looking good and then all of sudden are back into it … what’s happening in NSW could force the government’s hand a bit if it continues, maybe Job Keeper gets extended.

’Opposition Leader Anthony Albanese was critical of any near-term cut to Job Keeper, which yesterday was reduced from $1200 fortnight to $1000 for full-time workers and from $750 to $650 for part-time workers. He economy’’, but he acknowledged there would need to be a withdrawal of the wage subsidy in the future.

Australian Restructuring Insolvency and Turnaround Association chief executive John Winter expected to see a progressive increase in insolvencies through 2021, with many creditors waiting for the rule changes to ensure they get paid. ‘But that is going to lead to more businesses moving into a formal insolvency,’’

Mr. Winter said. ‘There’s no doubt that Job Keeper is what has been keeping most struggling businesses afloat or even made them more profitable than what they were pre-COVID. As it winds down, that’s going to see those businesses have to reassess their viability.’’