The Australian Taxation Office (ATO) can make people bankrupt for unpaid tax debts which they owe including debts for Director Penalty Notices.

To make someone bankrupt, the ATO must generally obtain a judgment against them for a tax debt over $5,000. Once the ATO has obtained a Judgment it will issue the person with a Bankruptcy Notice, giving 21 days from the date the Bankruptcy Notice is served to pay the tax debt owed. If the amount claimed in the Bankruptcy Notice is not paid, the ATO will apply to Court in order to bankrupt the person.

A person who cannot pay their debts, including their tax debts, may also voluntarily file for bankruptcy by lodging a Debtor’s Petition with the Australian Financial Security Authority (AFSA), a Federal Government agency. If a person voluntarily files for bankruptcy they may nominate to appoint a bankruptcy Trustee or they may appoint the Official Trustee from AFSA.

What are the Effects of Bankruptcy

When a person becomes bankrupt a bankruptcy Trustee is appointed to manage the bankruptcy. A bankruptcy Trustee is an independent person who will be appointed by the Court if the Court makes a person bankrupt or people who voluntarily become bankrupt can choose their own bankruptcy Trustee.

Bankruptcy normally lasts for 3 years unless the time period is extended by your bankruptcy Trustee.

Further information regarding bankruptcy and Personal Insolvency Agreements (which are an alternative to bankruptcy) is contained here.

Avoiding Bankruptcy

It is best to be proactive in dealings with the ATO and negotiate a payment arrangement prior to the ATO taking recovery action. However, if the ATO has already taken steps to bankrupt you, it is still possible to negotiate a payment arrangement if a feasible proposal can be put forward.

We have assisted numerous clients the ATO has commenced bankruptcy proceedings against, including recently negotiating a payment arrangement for a client who owed the ATO over $200,000 and who the ATO had commenced bankruptcy action against. We put a proposal to the ATO to pay the debt owed by instalments over two years. The proposal was initially rejected, however, we made a further offer to the ATO that they could take security over our client’s property as part of the arrangement. The ATO agreed and prepared security documents which our client signed and the ATO withdrew the legal proceedings it had commenced to make our client bankrupt.


If you have a tax debt , you should urgently obtain professional advice and assistance.  This will help you avoid ATO recovery action.

We can assist you deal with your tax debt problems.  So, please call us for an initial no obligation free consultation.

Struggling with Tax Debt?
We can help.  So call us today.

Contact Us

We’re here to help so contact us now for a free no obligation consultation.

Tax Debt Solved
GPO Box 691
Brisbane Qld 4001


Fax:  07 3221 8885
Phone: 07 3221 0055

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