Queensland Insolvencies Are Surging — Directors Must Act Now
Queensland is recording some of its highest business insolvency numbers in recent memory. According to data published by ASIC and tracked by the Australian Financial Security Authority (AFSA), corporate insolvencies across Australia surged in FY2024–25 and the upward trend is continuing into 2026, with Queensland consistently among the hardest-hit states.
For company directors, this is not just a statistic — it is a direct warning. Rising insolvencies mean heightened regulatory scrutiny, increased risk of personal liability, and a narrowing window to take protective action.
At Boss Lawyers, we are seeing a significant increase in directors seeking urgent advice about their obligations during financial distress. This article explains what every Queensland director needs to know right now.
The Numbers: What Is Happening in Queensland?
Key trends in 2025–26:
- Corporate insolvency appointments nationally have exceeded 11,000 for the first time since records began in their current form
- Construction, hospitality, and retail remain the most affected industries in Queensland
- Small and medium businesses (particularly those with turnover under $10 million) account for the overwhelming majority of appointments
- Director penalty notices (DPNs) issued by the ATO are at record levels, reflecting the ATO’s return to aggressive enforcement post-COVID
- ASIC is investigating more directors than at any point in the last decade, with a stated focus on insolvent trading and phoenix activity
The drivers are well documented: pandemic-era support measures (JobKeeper, ATO deferrals, temporary insolvency relief) masked underlying financial distress. As those measures unwound, businesses that were already struggling have been unable to service accumulated debts — particularly ATO debts that were deferred during 2020–22.
ASIC’s 2026 Enforcement Priorities: Why Directors Should Pay Attention
In November 2025, ASIC announced its 2026 enforcement priorities. Several are directly relevant to company directors:
1. Financial Reporting Misconduct
ASIC has flagged financial reporting misconduct as a key enforcement priority. This includes companies that fail to lodge financial reports, lodge misleading reports, or fail to keep adequate financial records. Directors have a duty under section 286 of the Corporations Act 2001 (Cth) to ensure the company keeps financial records that correctly record and explain its transactions and financial position.
2. Private Credit Practices
The rapidly expanding private credit sector is under ASIC’s microscope. Directors of companies that have borrowed from private credit funds (or that operate in the private credit space) should ensure their governance, disclosure, and conflicts management are robust.
3. Enduring Priority: Insolvent Trading
ASIC’s enduring enforcement priorities continue to include action against directors who allow companies to trade while insolvent. Under section 588G of the Corporations Act, a director who allows a company to incur a debt when there are reasonable grounds to suspect the company is insolvent (or will become insolvent) may be held personally liable for the debt.
Director Obligations During Financial Distress
If your company is experiencing financial difficulty, your legal obligations intensify significantly. Here is what the law requires:
Duty to Prevent Insolvent Trading (s 588G)
A director must not allow the company to incur a debt if:
- The company is insolvent at the time of incurring the debt, or becomes insolvent by incurring the debt
- There are reasonable grounds for suspecting the company is insolvent or will become insolvent
- The director was aware such grounds existed, or a reasonable person in a like position would have been so aware
The consequences of breaching this duty are severe:
- Civil penalty: Up to 5,000 penalty units ($1,650,000 at the current Commonwealth penalty unit rate of $330, effective October 2024) — or 3 times the benefit obtained, whichever is greater
- Compensation orders: The director may be ordered to compensate the company for the amount of the debts incurred
- Criminal liability: If the director was dishonest, criminal penalties of up to 2,000 penalty units ($660,000 at current rates) and/or imprisonment for 5 years apply
Safe Harbour Protection (s 588GA)
The safe harbour provisions, introduced in 2017, provide a defence to insolvent trading claims if the director can show they were taking a course of action reasonably likely to lead to a better outcome for the company than immediate administration or liquidation.
To rely on safe harbour, directors must:
- Be actively developing or implementing a plan to restructure or turnaround the company
- Ensure employee entitlements are being paid
- Ensure tax reporting obligations are being met
- Obtain appropriate advice from an appropriately qualified person
- Keep proper financial records
- Keep informed about the company’s financial position
Safe harbour is not automatic — it must be actively invoked and documented. Seeking legal advice early is essential to ensure you are properly protected.
Director Penalty Notices (DPNs)
The ATO can issue director penalty notices making directors personally liable for unpaid:
- PAYG withholding
- Superannuation guarantee charge (SGC)
- GST (from April 2020)
If the company’s BAS or SGC statements are more than 3 months overdue, the ATO can issue a lockdown DPN — meaning the director’s personal liability cannot be discharged even by placing the company into administration or liquidation. The only way to extinguish a lockdown DPN is to pay the debt personally.
With the ATO issuing DPNs at record levels in 2026, directors must ensure all lodgements are current, even if the company cannot pay the amounts owing.
Restructuring Options Available to Directors
Directors of financially distressed companies have several options:
1. Informal Restructuring
Negotiating directly with creditors to agree on payment plans, debt forgiveness, or revised terms. This preserves control and avoids formal appointments but requires creditor cooperation.
2. Small Business Restructuring (SBR)
Available to companies with total liabilities under $1 million (the threshold has been reviewed and may be increased), the small business restructuring process under Part 5.3B of the Corporations Act allows directors to retain control of the company while a restructuring practitioner develops a plan for creditor approval.
3. Voluntary Administration
Directors may resolve to appoint a voluntary administrator under section 436A. This triggers a moratorium on creditor enforcement and gives the administrator time to assess the company’s affairs and propose a deed of company arrangement (DOCA) or recommend liquidation.
4. Receivership
A secured creditor (typically a bank) may appoint a receiver. While directors lose operational control, they retain their office and may need to cooperate with the receiver.
5. Liquidation
Where the company has no viable future, directors may resolve to wind up the company through a creditors’ voluntary liquidation. This ensures an orderly distribution of assets to creditors and brings the company’s affairs to an end.
Five Steps Directors Should Take Right Now
If your company is under financial pressure, take these steps immediately:
- Assess your solvency position — can the company pay its debts as and when they fall due? Get a clear picture of cash flow, liabilities, and assets
- Ensure all ATO lodgements are current — even if you cannot pay, lodge on time to avoid lockdown DPNs
- Document everything — board minutes, financial reviews, restructuring plans. Safe harbour protection requires contemporaneous records
- Seek legal and financial advice early — the earlier you act, the more options you have. Once a lockdown DPN is issued, your options narrow dramatically
- Consider your personal exposure — have you signed personal guarantees? Are you aware of any potential insolvent trading claims? Understanding your personal risk is essential to making informed decisions
How Boss Lawyers Can Help
Boss Lawyers’ insolvency team provides urgent, practical advice to directors navigating financial distress. We can:
- Assess your personal exposure to insolvent trading and DPN claims
- Advise on safe harbour protections and help you document compliance
- Guide you through restructuring options — informal, SBR, VA, or liquidation
- Defend you against claims by liquidators or the ATO
- Act on director disputes that arise during periods of financial distress
We understand that directors facing insolvency issues need advice that is practical, commercial, and delivered urgently. We are experienced in protecting directors’ interests while ensuring compliance with the law.
Call 1300 267 711 or contact us online for a confidential discussion.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
