When it comes to insolvency, few creditors are more prolific than the ATO.

Tax debts are among the most common triggers for formal insolvency, yet many clients underestimate how quickly the ATO can escalate enforcement. For accountants and lawyers, recognising the warning signs and understanding both the enforcement tools and the options available is essential to protecting clients from unnecessary risk.

Key insights for accountants and lawyers

ATO as a leading creditor
The Australian Taxation Office is consistently the largest petitioning creditor in both corporate liquidations and personal bankruptcies.

Stronger enforcement action
After years of post-COVID leniency, the ATO has resumed firm collection strategies, including Director Penalty Notices (DPNs) and winding-up applications.

Director liability
DPNs can make directors personally liable for unpaid PAYG, GST, and superannuation. Missing strict response deadlines can leave directors exposed.

Early warning signs
Late BAS lodgments, mounting tax arrears, and ignored payment plans are clear indicators that the ATO is likely to escalate enforcement.

Options for clients
Engaging an insolvency practitioner early on can create breathing space through voluntary administration, safe harbour, or negotiated arrangements – often avoiding the need for winding-up.

The key takeaway for accountants and lawyers

Advisors are often the first to see tax arrears build up. Addressing them early, rather than waiting for ATO action, can protect directors from personal liability and give businesses a chance to restructure rather than collapse.

Encourage clients to treat tax debts with the same urgency as any secured creditor. An insolvency practitioner can help evaluate whether repayment plans or formal appointments are the best path forward. Early intervention is always less costly – both financially and professionally.

We are here to help

If one of your clients is experiencing financial distress, speak to a trusted insolvency professional today. We’re here to help you navigate your options with confidentiality and care.

+61 2 9251 5222
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