Insolvency Facts: Check Your Knowledge
Insolvency is tough, but it's not the end. With the right guidance and a proactive approach, you can navigate through this and emerge stronger.
What proportion of corporate insolvencies in Australia is made up of small businesses?
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Small businesses, with a turnover of less than $1 million, make up around 80% of corporate insolvencies in Australia.
Do turnaround professionals believe early intervention could prevent most corporate insolvencies?
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Yes, 65% of turnaround professionals believe that earlier intervention could prevent the majority of corporate insolvencies.
What are the main causes of insolvency according to the Australian Securities and Investments Commission (ASIC)?
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The main causes of insolvency are inadequate cash flow (50%), poor strategic management (41%), and trade debtor losses (26%).
What is the average time taken from the appointment of an external administrator to liquidation in Australia?
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The average time taken from the appointment of an external administrator to liquidation is around 1-2 years, depending on the complexity of the insolvency.
How much do unsecured creditors typically receive in the event of an insolvent company liquidation in Australia?
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In Australia, unsecured creditors typically receive less than 10 cents on the dollar in insolvent company liquidations.
What percentage of companies that enter voluntary administration in Australia successfully avoid liquidation?
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About 50% of companies that enter voluntary administration successfully avoid liquidation and return to solvency.
Frequently Asked Questions
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What if the company can’t pay debts to creditors?In this case, you may need a Voluntary Administrator (VA) or a Small Business Restructuring (SBR) practitioner. TTJ Advisory can help by: Identifying tax debts tied to director penalties, Negotiating with creditors for debt compromises, Generating working capital through restructuring to address outstanding debts, and Sourcing funding through future profits, personal contributions, or third-party funds. This proactive approach gives you a structured plan to manage debts while preserving the company's ability to operate.
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Is liquidation necessary if i can’t pay the debts?In cases where there is no chance of recovery, commencing liquidation will stop the clock on the DPN and help directors avoid personal liability under certain circumstances. Our in house liquidator will assist you through the process.
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I have been issued a lockdown DPN - what do I do next?Lockdown Director Penalty Notices (DPNs) are issued to directors when a company fails to submit its business activity statements (BAS), instalment activity statements, or superannuation guarantee statements within three months of the due date. Once a lockdown DPN is issued, the penalty becomes fixed, meaning the director is personally liable for the unpaid debt. This liability cannot be removed or cancelled through any other means except by paying off the debt in full. Placing the company into voluntary administration or liquidation will not extinguish this personal liability.
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What are your options once you receive a lockdown DPN?Pay the Debt in Full: The most direct and essential option is to pay off the company’s tax debt in full. This is the only way to clear the liability imposed by a Lockdown DPN. Personal Insolvency Agreement (PIA): This is a legally binding agreement where the director makes a proposal to creditors (such as the ATO) to settle the debts over time or partially. A PIA allows the director to avoid bankruptcy, but it requires the appointment of a bankruptcy trustee to manage the agreement. The trustee will take control of the director's assets and administer the terms of the agreement, including negotiating with creditors. Bankruptcy: If the director is unable to pay the debt or arrange a PIA, declaring bankruptcy may be the final option. In this case, a bankruptcy trustee is appointed to manage the director’s assets and debts. The trustee will oversee the liquidation of assets to pay off the debts and handle communications with creditors, including the ATO.
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How are creditor payments prioritised in liquidation?Payments follow a set order, prioritising employee entitlements and secured creditors before other unsecured debts. Unsecured creditors can file claims and receive distributions based on available funds and the priority order.







