Before you call an insolvency firm: what every option really costs you

Why would a funder write about insolvency?

Because if you search for help with ATO debt, much of what you’ll find is written by businesses that earn their living from insolvency and restructuring. Some are excellent registered professionals. Some are unregulated “pre-insolvency” advisers. Either way, their pages tend to present four options — pay, restructure, administration or liquidation — and treat “pay” as impossible. Funding often isn’t mentioned at all.

We’re not an insolvency firm, a liquidator, a pre-insolvency adviser or a tax agent, and we don’t earn anything from any of these processes. Our goal is the opposite: keep the business trading and you in control, without professional fees that so often run to tens of thousands of dollars. But we also know that for some companies, a registered insolvency process is the right answer. This section explains each option honestly so you can tell which situation you’re in.

How do the options compare?

	Funding	Small business restructuring	Voluntary administration	Liquidation
Who controls the company	You	You, with a practitioner overseeing	The administrator	The liquidator
Eligibility	Viable business, security or cash flow	Liabilities not over $1m; entitlements and lodgements current; no use by company or directors in past 7 years	Any company	Any company
What creditors get	Paid in full	Median 20 cents in the dollar (ASIC, 2022–24)	Depends on the deed or outcome	Often little — only 4% of standard smaller CVLs paid a dividend (ASIC, 2024)
Professional fees	None — the loan’s own costs apply	Median around $16,000 for the restructuring stage, plus plan fees (ASIC)	Administrator’s fees	Average around $18,000 for standard CVLs under $1m (ASIC)
Standard DPN (within 21 days)	Remitted by payment	Remitted by appointment	Remitted by appointment	Remitted by winding up
Lockdown DPN	Remitted by payment	Not remitted	Not remitted	Not remitted
Personal guarantees	Unaffected — debts paid	Survive	Survive	Survive
Investigation of directors	No	Limited	Yes	Yes — reports to ASIC

ASIC’s figures are practitioner fees only. Any fees paid to pre-insolvency advisers or referrers are on top and weren’t captured in its data.

What does each process fix — and what doesn’t it?

Small business restructuring can reduce unsecured debts, including ATO debt, while directors stay in control. But it has entry conditions, costs, a 7-year bar and doesn’t remove lockdown director penalties. See small business restructuring.

Voluntary administration hands control to an administrator, who looks for a better outcome than liquidation, often through a deed of company arrangement. See administration vs liquidation.

Liquidation ends the company. A liquidator sells assets, investigates and reports to ASIC, and can claw back certain payments. Lockdown DPNs and personal guarantees survive. See liquidation and ATO debt.

Safe harbour protects directors from insolvent-trading liability during a genuine turnaround — but only if super and lodgements stay current. See safe harbour.

How do you know which situation you’re in?

Ask yourself three honest questions:

1. Once the ATO debt is dealt with, does the business make money? If yes, funding or a plan is usually worth exploring first.
2. Is any of the debt locked down? If yes, payment is needed for those amounts whatever else happens.
3. Is the total debt beyond what the business could ever repay? If yes, a registered process may be the responsible path.

Our guide restructure or refinance walks through the decision.

Who should you talk to — and who should you be careful of?

ASIC says plainly that “the pre-insolvency industry is unregulated, and advisers have varying qualifications and experience.” The ATO’s own guidance lists warning signs, including advisers who contact you after court action has started and those who charge a fee based on a percentage of your debt. Before you call anyone, read before you call anyone about tax debt, work through the warning-signs checklist, and take the questions to ask any adviser with you.

Registered liquidators have an important role, and the right one can help a company in genuine trouble. The point isn’t to avoid them — it’s to make sure you’re steered there for the right reasons, after the cheaper options have been properly considered.

What should you have in front of you before any conversation?

Whoever you speak to — a funder, a liquidator, a restructuring practitioner or a free counsellor — the conversation is far more useful with these in hand:

• the company’s ATO statement of account, split by account;
• the lodgement history, so lockdown amounts can be identified;
• any notices — DPN, garnishee, credit-reporting warning, statutory demand, wind-up;
• a list of other creditors and amounts;
• a list of personal guarantees you’ve given;
• recent bank statements and a rough 13-week cash-flow view;
• details of any property that could be used as security.

With those, you can compare options on facts rather than impressions, and anyone advising you can be held to specifics.

A note on timing

If a director penalty notice has arrived, the 21-day window affects which of these processes can remit a standard penalty. Don’t let the clock push you into an appointment you haven’t compared properly — but don’t let it run out while you compare, either.

Talk to a funder before you sign anything

If your business is viable and you’d like to know whether funding could avoid an insolvency process, see if you qualify before you sign an engagement letter with anyone. There’s no credit check to enquire, your details stay with one team rather than being spread across lenders, and a real person will tell you honestly if a registered process is the better path. Please give accurate figures, including any lockdown amounts.