Welcome to our final newsletter for 2025.
Following on from last year’s recap from the Sunshine Coast, Queensland, we share with you our industry experiences for 2025.
Merry Christmas and happy holiday season to our friends and valued colleagues. Thank you again for your support.
1. ATO Debt Collection Continues to Soar!
- The ATO continues to aggressively pursue unpaid taxation debts, reported to be in excess of $101 billion, the largest it has ever been!
- The feedback we are receiving is that ATO payment arrangements are becoming more difficult to obtain.
- ATO debt collection continues to drive a high level of insolvencies.
- Whilst there has been more of a focus on collecting company and business-related debts, collection of individual debts (including sole traders) has increased.
- Court appointed Liquidations have increased substantially compared to previous financial years; signalling stronger and more proactive action from creditors (especially the ATO) to chase debts through legal action. Court Liquidations exceed the number of SBRs for the financial year to date.
- Over 84,000 Director Penalty Notices (DPNs) were issued during the 2025 financial year, to make directors personally liable for unpaid company tax and superannuation.
- Garnishee notices continue to be issued to recover funds (especially from bank accounts, accounts receivable, income of individuals).
- Credit defaults (for business debts in excess of $100,000) are still being reported to credit agencies by the ATO, which adversely impacts credit scores (and the potential ability to borrow money) and can impact the continuity of trade supplier terms / accounts.
2. Small Business Restructures (SBRs) on the decline
- SBR appointments have slowed in the financial year to date, down 40% on the same period last year.
- The acceptance rate for SBRs is also down – from 79% last year to 63% this year.
- The ATO is still the major creditor in SBR appointments.
- Whilst it depends on each case, the ATO are seeking higher returns than previously.
- The ATO are rejecting some SBR proposals in situations where there are large, related party debts owed to the Company (eg Director / Division 7A loans), historical non-compliance in relation to lodgements and lack of payments historically (especially where there has been little to no payments to the ATO over the previous years).
- We do a lot of work at the start to:
- Maximise the prospects of success;
- Provide a better outcome than a liquidation; and
- Consider the viability of the Company’s business – it is often a catalyst for a review of the company’s financial performance and to improve and tighten up areas (eg improve compliance, review revenue and costs, etc).
- SBRs are still a viable restructuring process for building companies in Queensland, as the event does not result in the automatic loss of a building licence for a company (the QBCC will still consider other compliance issues).
- The feedback from the ATO is:
- Lump sum up front payment/s are viewed favourably.
- The shorter the payment period, the better (2 years or less is preferred).
- Director loan accounts (even for drawings) and related party loans are not an automatic reason to reject a SBR proposal, some repayment of the loan under the SBR, and future repayment of the balance of the loans, is viewed more favourably.
- Related party creditors should not claim in the SBR – to maximise the ATO dividend.
- Cash flow forecasts and financial statements need to be realistic and justifiable – and the ATO will review this against historical financial information for reasonableness.
- Remember, SBRs are only for companies (not available for individual debts – the Bankruptcy Act deals with this).
3. Voluntary Administrations (VAs) continue to have a place
- SBRs are still more popular than VAs as the preferred method to compromise Company debts
- VAs are the fourth highest type of external administration appointment for the financial year, behind CVLs, Court Liquidations and SBRs
- VA appointments remain relatively steady over the last few quarters
- VAs still have a place when:
- Corporate structures are complex, and greater flexibility is required for a compromise.
- If debts exceed $1million.
- Where employee entitlements (including superannuation) are owed.
- Related party debts wish to claim and participate in voting.
- Other eligibility criteria for SBRs are not met.
4. Director and Shareholder Disputes on the Rise?
- There continues to be an increase in director and shareholder disputes, especially with increased financial pressure and stress on businesses.
- Shareholder disputes can often lead to litigation and an insolvency appointment.
- We still do not see many Shareholder Agreements in place, which could assist with resolving disputes.
5. Individual / Personal Debts Owed
- Personal insolvencies remain lower than pre-Covid numbers; however, they have increased by over 6% compared to last financial year and are on the rise again.
- The ATO continue to issue DPNs to Directors to make them personally liable for Company debt.
- Some important factors to consider are:
- DPN liability can arise due to late lodgements, and they can become locked down, i.e., can only be avoided if the debt is paid or a valid defence is available.
- ATO debts are not statute barred so there is no time limit on collection (unlike other debts).
- The ATO can retain tax refunds to apply against debts owed – even if the debt was previously classified “non-pursuit”.
- The ATO can chase these debts at a future date, which can result in the loss of assets acquired later, including interests in deceased estates!
6. Members’ Voluntary Liquidations (MVLs) are still a useful tool to save tax!
- MVLs (solvent liquidations) are still being utilised to wind up companies to save tax – Exiting the Family Business and Members Voluntary Liquidations.
- MVLs are also beneficial when shareholders can’t resolve disputes, and the Company is solvent – they can appoint an independent party to wind-up the company.
7. The Main Industries facing Insolvency are (still)…
- Construction, Hospitality and Retail Trade for corporate insolvencies.
- Construction, Health Care and Social Assistance for personal insolvencies.
- Economic pressures and consumer spending continue to impact small businesses.
- We also see a lack of business acumen and planning with Companies that enter insolvency appointments, often due to not seeking and obtaining appropriately qualified advice.
8. Safe Harbour – Protection for Directors from Insolvent Trading
- As noted last year, Safe Harbour was introduced in 2017 to provide protection for Directors from insolvent trading, whilst engaging a professional (such as SV Partners) to assist in implementing a plan to provide a better outcome than a liquidation.
- Whilst the number of appointments is not reported to ASIC, our experience is that there has been limited use of the regime, especially in the SME market.
- It provides a viable process for directors concerned about insolvent trading, where there is potential to save a Company and avoid a formal external administration.
9. Voluntary Liquidations (CVLs) are still the most common form of insolvency
- Voluntary liquidations for insolvent companies are still the most prevalent type of insolvency appointment – there have been 2,480 appointments for the financial year to the end of November 2025.
- ATO debt continues to be a main driving factor for liquidations.
- Whilst liquidations are often difficult on directors, shareholders, employees, creditors and other stakeholders, it can provide relief from stress, some closure and minimise further incurring of debts.
- We always encourage early intervention, and we are available to discuss:
- The options available and the implications.
- Alternative actions that may assist the business to continue, survive and maximise returns to creditors.
- An exit strategy and plan for the future if the Company is not financially viable to continue.
Thank you again for your support in 2025. We will continue to provide relevant and useful information in 2026.
Article by Jason Cronan (Director) and Daniel Luckman (Associate Director) – Sunshine Coast