By Brandon Dunn
Accountants rarely hesitate because they cannot see the problem. They hesitate because they are not sure what happens to the client relationship once a specialist is involved, and because the first call feels like a decision you can’t walk back.
Those two concerns are worth separating. An early conversation with a practitioner is not a formal appointment, and it does not commit your client to anything. Timing is also the whole ballgame: the statutory protections available to a director, including the safe harbour in section 588GA of the Corporations Act 2001 (Cth), depend on the director acting early and developing a course of action reasonably likely to lead to a better outcome. A late conversation cannot manufacture the conditions those protections require.
The trigger is solvency pressure, not a formal appointment
The useful trigger for a call is the point at which a director’s decisions start to carry personal exposure. That is often considerably earlier than the point at which a formal process begins.
Section 588G of the Corporations Act 2001 (Cth) imposes a duty on directors to prevent a company incurring debts while it is insolvent, and the consequences of getting that judgement wrong may attach to the director personally. Our explainer on what insolvent trading means in practice sets out the test, the reasonable grounds for suspecting insolvency, and the safe harbour and other defences. The relevant point for a referring accountant is that a director’s potential exposure often begins accruing well before any formal insolvency appointment is made or a creditor takes steps to recover a debt.
So the question is not whether the company is beyond saving. It is whether the director is currently making decisions that could be assessed against a standard they have not been told about.
Four signals that justify a call
Each of these is a pattern an accountant can see from the ledger, before anything formal is contemplated.
Tax debt being used as working capital. A growing balance with the Australian Taxation Office, which administers the director penalty regime, sits in a ledger the accountant already has, so it is visible without any additional enquiry. Unpaid pay-as-you-go withholding and superannuation guarantee charge amounts carry the sharpest consequence, because they expose the director personally through a director penalty notice. The distinction between a lockdown and a non-lockdown notice determines whether the director can still discharge the liability by appointing an external administrator, depending on whether the amounts were reported on time. Most clients have never had that explained to them.
Creditor terms quietly stretching. Suppliers moved from 30 days to 60, then to payment on delivery. The client will often describe this as a cash-flow timing issue rather than creditors repricing their risk.
Refinancing that solves a symptom. A new facility that clears an arrears balance without changing the underlying trading position buys months, not a solution, and it usually adds security over assets that would otherwise have been available.
Director loan accounts moving the wrong way. Where drawings continue while the company’s position deteriorates, the transactions themselves can be examined afterwards as unreasonable director-related transactions under section 588FDA of the Corporations Act 2001 (Cth). A liquidator looking backwards is not constrained by how ordinary the drawings felt at the time.
None of these on its own means a formal process is coming. Together they describe a business where the director’s options are narrowing faster than the director realises.
What the options actually are
Directors often arrive believing there is one outcome and it is the end of the business. There are distinct paths, and they lead to genuinely different places.
Voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth) gives a company a moratorium while an administrator assesses whether it can be saved, often through a deed of company arrangement, which is the binding agreement between the company and its creditors that a successful administration produces. Our guide to voluntary administration walks through the sequence, the first and second meetings of creditors and the statutory timeframes.
Small business restructuring is a separate pathway in which the company keeps control of the business while a restructuring practitioner assists in developing and presenting a plan to creditors. It is subject to eligibility criteria, including a cap on total liabilities, and those criteria are the first thing to check rather than the last, because once a company ceases to satisfy those conditions, the restructuring pathway may no longer be available.
Liquidation is a winding up. Receivership is different again: a receiver is generally appointed by a secured creditor and acts in relation to the property covered by that security, not on behalf of creditors generally.
One distinction matters more than any other in the referral conversation. Bankruptcy is a personal insolvency process under the Bankruptcy Act 1966 and applies to individuals, including sole traders and partners. A company that cannot pay its debts does not become bankrupt; it enters one of the corporate processes above. Directors who have given personal guarantees can face both situations at once, which is precisely why the two need to be discussed separately rather than as one problem.
Who regulates what
This trips up more advisers than it should, and getting it right in front of a client costs thirty seconds.
The Australian Securities and Investments Commission registers liquidators and oversees corporate insolvency, and publishes a useful set of insolvency information sheets written for directors and creditors. The Australian Financial Security Authority administers the personal insolvency system and regulates registered trustees.
Professional standards for the practitioners themselves sit with the Australian Restructuring Insolvency and Turnaround Association (ARITA), whose code of professional practice applies to members across both streams.
Glenn O’Kearney’s registration as both a registered liquidator and a registered trustee in bankruptcy, together with his status as an ARITA Professional Member, gives GT Advisory the technical capability to understand both the corporate and personal insolvency issues that often arise for directors.
While each matter must be assessed for independence and conflict considerations, this dual qualification means directors can receive informed guidance on the broader implications of the company’s distress.
What the referring relationship looks like afterwards
The concern that the accountant loses the client is understandable, and the structure of the work argues against it. A formal appointment simply changes who is responsible for the company’s affairs. It does not change who prepares the tax returns, who handles the compliance work, or who advises the director’s other entities, and none of that scope transfers to the practitioner.
The relationship risk runs the other way. The client who learns after the fact that the warning signs were visible for a year and that nobody raised them is a harder conversation than the referral, and it is one the accountant has to have alone.
One arrangement that works well is a standing informal channel. The accountant calls, describes the position without naming the client if they prefer, and gets a view on whether it warrants a closer look. A call that ends in “keep watching it, and ring me if this line moves” is a useful call, not a wasted one.
Making the first call useful
Come with the last two years of financial statements, the current aged creditors and debtors listings, the ATO integrated client account statement, and a short note on any security granted in the past twelve months. Those four items are what a practitioner needs to say whether the company has options and which of them are still open.
None of this is a quick fix, and we will not describe it as one. Insolvency outcomes are statutorily framed, the regulatory consequences are real, and setting a director’s expectations honestly at the first conversation is most of the value an early referral adds.
Glenn O’Kearney, our principal, is a registered liquidator and a registered bankruptcy trustee, which is why owner-operated matters where the corporate and personal positions are tangled can be assessed in one conversation rather than two. We emphasise early intervention and business rescue, in plain English rather than jargon. Please get in touch with one of our qualified and experienced experts through the insolvency and restructuring team page for an obligation-free initial consultation.
Statutory references in this article are current as at 26 August 2026. Eligibility thresholds and regulatory guidance change, so confirm the position that applies to a specific matter before you rely on it.