Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Safe harbour is available to any director of a company who:
- Starts taking the restructuring course of action from the time they first suspect (or ought to have suspected) the company may become insolvent or is insolvent
- Meets the eligibility conditions set out in section 588GA(1)(b)
- Is genuinely pursuing a course of action reasonably likely to produce a better outcome
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Section 588GA of the Corporations Act provides that a director is not liable under section 588G (insolvent trading) for debts incurred by the company if, at the time the debt was incurred, the director was taking a course of action that was “reasonably likely to lead to a better outcome” for the company and its creditors than immediate administration or liquidation.
This is a substantial protection. It means directors can continue to operate a financially distressed company — incurring debts in the ordinary course of business — without personal liability, provided they are genuinely pursuing a restructuring plan that has a reasonable prospect of success.
Who Can Use Safe Harbour?
Safe harbour is available to any director of a company who:
- Starts taking the restructuring course of action from the time they first suspect (or ought to have suspected) the company may become insolvent or is insolvent
- Meets the eligibility conditions set out in section 588GA(1)(b)
- Is genuinely pursuing a course of action reasonably likely to produce a better outcome
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Section 588GA of the Corporations Act provides that a director is not liable under section 588G (insolvent trading) for debts incurred by the company if, at the time the debt was incurred, the director was taking a course of action that was “reasonably likely to lead to a better outcome” for the company and its creditors than immediate administration or liquidation.
This is a substantial protection. It means directors can continue to operate a financially distressed company — incurring debts in the ordinary course of business — without personal liability, provided they are genuinely pursuing a restructuring plan that has a reasonable prospect of success.
Who Can Use Safe Harbour?
Safe harbour is available to any director of a company who:
- Starts taking the restructuring course of action from the time they first suspect (or ought to have suspected) the company may become insolvent or is insolvent
- Meets the eligibility conditions set out in section 588GA(1)(b)
- Is genuinely pursuing a course of action reasonably likely to produce a better outcome
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
The safe harbour provisions — introduced into the Corporations Act 2001 (Cth) in September 2017 via the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 — were a landmark reform in Australian insolvency law. They were designed to change director behaviour: to encourage directors who first suspect their company may be heading towards insolvency to seek proper advice and pursue genuine restructuring, rather than immediately appointing an administrator or abandoning the company to its fate. Safe harbour gives directors a “shield” from insolvent trading liability while they work on a genuine plan to rescue the company.
What is Safe Harbour? (Section 588GA Explained)
Section 588GA of the Corporations Act provides that a director is not liable under section 588G (insolvent trading) for debts incurred by the company if, at the time the debt was incurred, the director was taking a course of action that was “reasonably likely to lead to a better outcome” for the company and its creditors than immediate administration or liquidation.
This is a substantial protection. It means directors can continue to operate a financially distressed company — incurring debts in the ordinary course of business — without personal liability, provided they are genuinely pursuing a restructuring plan that has a reasonable prospect of success.
Who Can Use Safe Harbour?
Safe harbour is available to any director of a company who:
- Starts taking the restructuring course of action from the time they first suspect (or ought to have suspected) the company may become insolvent or is insolvent
- Meets the eligibility conditions set out in section 588GA(1)(b)
- Is genuinely pursuing a course of action reasonably likely to produce a better outcome
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
- Safe harbour (section 588GA of the Corporations Act 2001 (Cth)) protects directors from personal liability for insolvent trading while they pursue a genuine restructuring
- Introduced in 2017 to encourage directors to seek restructuring advice rather than abandon ship at the first sign of financial trouble
- Directors must be developing a course of action reasonably likely to produce a better outcome than immediate administration or liquidation
- Key conditions: ATO reporting current, employee entitlements being met (or arrangements in place), and appropriate advisors engaged
- Safe harbour ends immediately if the restructuring plan fails or the director stops pursuing it
Safe Harbour Provisions for Directors — Protection from Insolvent Trading Liability
The safe harbour provisions — introduced into the Corporations Act 2001 (Cth) in September 2017 via the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 — were a landmark reform in Australian insolvency law. They were designed to change director behaviour: to encourage directors who first suspect their company may be heading towards insolvency to seek proper advice and pursue genuine restructuring, rather than immediately appointing an administrator or abandoning the company to its fate. Safe harbour gives directors a “shield” from insolvent trading liability while they work on a genuine plan to rescue the company.
What is Safe Harbour? (Section 588GA Explained)
Section 588GA of the Corporations Act provides that a director is not liable under section 588G (insolvent trading) for debts incurred by the company if, at the time the debt was incurred, the director was taking a course of action that was “reasonably likely to lead to a better outcome” for the company and its creditors than immediate administration or liquidation.
This is a substantial protection. It means directors can continue to operate a financially distressed company — incurring debts in the ordinary course of business — without personal liability, provided they are genuinely pursuing a restructuring plan that has a reasonable prospect of success.
Who Can Use Safe Harbour?
Safe harbour is available to any director of a company who:
- Starts taking the restructuring course of action from the time they first suspect (or ought to have suspected) the company may become insolvent or is insolvent
- Meets the eligibility conditions set out in section 588GA(1)(b)
- Is genuinely pursuing a course of action reasonably likely to produce a better outcome
Critically, the benefit is lost if the director stops pursuing the course of action, if the course of action is no longer reasonably likely to produce a better outcome, or if the company enters administration or liquidation (at which point the safe harbour period ends and the administrator or liquidator scrutinises what was done).
How to Qualify for Safe Harbour — The Key Conditions
Section 588GA(1)(b) sets out the conditions that must be satisfied for safe harbour to apply. Directors must ensure:
- Tax reporting obligations are met — the company must be meeting its obligations to report to the ATO (including lodging BAS, PAYG summaries, and tax returns on time)
- Employee entitlements are being paid — wages, superannuation and other entitlements must be paid as they fall due, OR the company must have made proper arrangements to pay them
In addition to these explicit conditions, the Court will assess whether the “course of action” was genuinely and actively being pursued — which in practice requires:
- Obtaining appropriate advice from qualified advisors (accountants, restructuring advisers, lawyers)
- Developing a documented restructuring plan (even at a high level)
- Keeping the board and advisors informed of progress
- Maintaining books and records to a standard that enables proper financial assessment
- Acting with appropriate speed — the defence is not available if the director “sits on their hands”
The Restructuring Plan Requirement
The centrepiece of safe harbour is the “course of action reasonably likely to lead to a better outcome.” While the legislation does not mandate a formal written restructuring plan, in practice directors who cannot demonstrate a coherent, actively-pursued plan will struggle to establish the defence. Courts will examine:
- Was there a documented plan (even at a high level)?
- Was the plan developed with input from qualified advisors?
- Was progress regularly reviewed?
- Was the plan updated as circumstances changed?
- Was the plan actually being implemented, or was it theoretical?
Directors who develop a clear, documented plan — supported by financial modelling, advisor input, and board-level decision-making — are in the strongest position to rely on safe harbour. Those who can only point to informal discussions or vague intentions are at risk.
When Does Safe Harbour End?
Safe harbour is not permanent protection. It ends when:
- The director stops developing or pursuing the restructuring course of action
- The course of action is no longer reasonably likely to produce a better outcome
- The company enters voluntary administration or liquidation
- ASIC applies for and obtains a declaration that safe harbour does not apply
From the moment safe harbour ends, any debts incurred after that point (but before formal insolvency proceedings) may give rise to insolvent trading liability in the normal way.
Safe Harbour vs Voluntary Administration — Choosing the Right Path
| Factor | Safe Harbour | Voluntary Administration |
|---|---|---|
| Director control | Directors retain control of the company | Administrator takes control |
| Public notification | Private — no public announcement required | Public — ASIC notified, creditors notified |
| Moratorium on creditors | No formal moratorium | Automatic moratorium on most creditor action |
| Cost | Advisors’ fees; no formal insolvency costs | Administrator’s fees (often substantial) |
| Creditor involvement | No formal creditor process | Creditor meetings; creditors vote on outcome |
| Risk of challenge | Liquidator (if company later fails) will scrutinise the plan | Transparent process; administrator reports to creditors |
| Best when | Company is genuinely restructurable; need time and space to execute a plan | Restructuring complex; need moratorium; or DOCA may be the best outcome |
Frequently Asked Questions
Does safe harbour protect me from all insolvent trading claims?
Safe harbour under section 588GA only protects from personal liability for debts incurred during the period the qualifying course of action was being pursued. It does not protect directors from liability for debts incurred before the course of action began, or after it ended. It also does not protect against fraud, breach of duty, or other forms of director liability.
Do I need to tell creditors I am relying on safe harbour?
No. Safe harbour is a private matter between the company, its directors, and their advisors. There is no legal requirement to notify creditors or make any public disclosure that you are relying on the safe harbour defence. However, if the company subsequently fails and a liquidator is appointed, the liquidator will investigate and may challenge whether safe harbour conditions were genuinely met.
What advisors do I need for safe harbour?
The legislation refers to “appropriately qualified advisors” — in practice, this means restructuring accountants, insolvency practitioners, and commercial lawyers. The key is that the advice must be relevant to the restructuring plan being pursued, and the director must have genuinely acted on it. Engaging a lawyer alone is not sufficient if no structured plan is developed.
When should I start taking steps to access safe harbour?
As early as possible — and critically, from the moment you first suspect (or ought to suspect) that the company may be insolvent or heading towards insolvency. The later you act, the narrower the window for safe harbour to protect subsequent debts. Directors who act at the first signs of financial distress are in a far stronger position than those who wait until a creditor issues a statutory demand.
How Boss Lawyers Can Help
Safe harbour is a powerful tool for directors navigating financial distress — but it requires careful legal and financial planning to be effective. The defence will only protect you if it is properly established and documented from the outset. Retrospective attempts to construct a safe harbour defence after the fact rarely succeed.
Mark Harley, Principal Solicitor at Boss Lawyers, has over 17 years’ experience advising directors in complex commercial and insolvency matters. We can help you understand whether safe harbour applies to your situation, develop a legally sound restructuring plan, ensure the eligibility conditions are being met, and document your decisions in a way that will withstand scrutiny if the company subsequently enters liquidation.
For related guidance, see our pages on Insolvent Trading — Director Liability, Voluntary Administration Explained, and Insolvency Lawyers Brisbane.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Contact Boss Lawyers today: 1300 267 711 | Get in Touch
Mark Harley | Principal Solicitor | Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000