By Steve Jardie, Manager

Back in the early 1980s, cigarettes cost less than $2 a packet. Today, prices have climbed to as much as $40–$60 per packet, largely driven by taxation. This increase has created the conditions for an illicit market to emerge, one that capitalises on cheaper, untaxed imports. In response, during November 2025, the Queensland Government introduced new legislation aimed at dismantling the illegal tobacco trade, reducing associated violence, and restoring lost tax revenue.

This legislative shift set the stage for a major crackdown. Reports indicate that more than 200 tobacco stores across South East Queensland were closed following coordinated enforcement activity. It was within this environment that a tobacco and accessories store became the subject of an insolvency engagement that we recently worked on here at B&T.

The Engagement

The Company’s records indicated that it appeared to be trading solvently leading up to its closure, noting that sales included a mix of legal and illegal products, making the true nature of the business more complex.

The situation changed abruptly when authorities conducted a raid on the premises. All stock, both legal and illegal, was seized. Under the new legislation, lawful tobacco products are classified as “tainted goods” when mixed with illicit stock. As a result, all stock at the store was forfeited to the State and destroyed. Tobacco is identified as “chop-chop” and other goods are discarded.

With no remaining inventory, the business was effectively stripped of its operating capacity overnight, leading to the Liquidator’s Appointment.

Legal and Financial Implications

Following the raid, the company was issued fines totalling nearly $300,000 by the State Penalties Enforcement Registry (SPER). This became the primary liability. However, an important technical point in insolvency is that fines are not treated as provable debts in a liquidation. This meant that even if funds had been available, SPER would not have been entitled to receive a dividend.

Other creditor claims were minimal, estimated at only $20,000 to $30,000 with limited tax obligations. The short operational life of the company, around 18 months, also meant there were relatively few financial records to assess.

An additional layer of complexity emerged around director liability. While the company itself could not discharge the fines through liquidation, there remained the possibility that the director may be held personally liable.

Key Takeaways

This case highlights the far-reaching impact of regulatory change on business operations. The introduction of strict legislation not only shut down illegal activity but also captured legitimate products under “tainted goods” provisions. It also underscores how quickly a seemingly profitable business can collapse when exposed to legal enforcement.

Perhaps the most striking lesson is the personal risk to directors. Even where a company is wound up, liabilities such as fines may follow individuals beyond the life of the business.

Understanding the risks is critical. Whether you’re operating in a high-risk industry or advising those who do, staying informed and compliant is essential. If you’re unsure where a business stands, now is the time to seek guidance, before circumstances force the issue.

By Neil Mitchell 

The current fuel shock is already reshaping insolvency risk across industries in Australia. While transport businesses are feeling the pressure first, the effects will not be limited to a single sector.

Nor will the impact be linear. Businesses are likely to face waves of solvency pressure, with some temporarily dipping into distress before potentially sliding further if conditions persist.

In this article, we unpack the short-, medium-, and long-term impacts that businesses across Australia will face and what their trusted Advisors should look out for.  

Short Term: Immediate Cash Flow Pressure and Margin Erosion

The first phase of the fuel crisis is already underway. The earliest indicators are cash flow strain and rapidly eroding margins, particularly for transport-dependent businesses.

Even before this current crisis, we were already fielding more and more calls from companies being tipped into liquidation.

The industries we are seeing most exposed in this short-term phase include:

• Road transport and logistics
• Fleet-heavy service providers
• Manufacturing dependent on freight inputs
• Retailers reliant on physical supply chains

What we’re seeing now is rising fuel costs increasing operating expenses faster than businesses can adjust pricing. This is creating margin compression and immediate liquidity gaps.

For companies already operating on thin margins, the inability to pass on cost increases becomes critical. As costs rise, businesses may fund shortfalls through delayed payments.

This environment triggers the first insolvency risk: temporary cash-flow insolvency. Businesses may still be viable in the long term but face immediate liquidity stress.

We know that many businesses move in and out of temporary insolvency as cash flow fluctuates. In normal conditions, this is manageable. However, where margins remain tight, temporary liquidity stress can quickly become persistent.

Advisors should monitor:

• creditor balances
• delayed superannuation or tax payments
• difficulty meeting financial repayments

These signs indicate that a business may be moving from short-term pressure to deeper insolvency risk.

Medium Term: Supply Chain Disruption and Contract Risk

The medium-term risk will emerge as cost increases flow through supply chains and bump up against existing contractual arrangements, particularly fixed-price contracts.

The construction and infrastructure sectors are especially vulnerable here. Many businesses have locked in pricing months or years in advance, leaving them unable to absorb rising fuel costs.

This creates a delayed insolvency wave as contracts signed under older costings become unprofitable. Even if fuel prices stabilise, the lag effect remains.

Payment delays further compound the problem and create domino-style insolvency risk:

• Supplier cash flow gaps
• Delayed payments down the chain
• Increased working capital needs
• Greater reliance on credit
• Tighter lending conditions

The industries we believe will be most exposed in the medium term include:

• Construction and infrastructure
• Manufacturing with fixed-price supply contracts
• Cabinet makers and subcontract trades
• Mining supply chains
• Project-based industries with long lead times 

Long-Term: Structural Pressure and Recession Risk

Even if fuel prices stabilise, the impact will continue. Contracts, debt, and reduced margins take time to adjust to. This cumulative pressure may contribute to a broader economic slowdown.

This will create ongoing financial pressure, particularly for businesses that have absorbed losses or taken on additional finance.

Businesses that survive the early and medium-term phases may still face:

• Increased debt burdens via higher debt servicing costs
• Tighter credit access
• Reduced profitability through ongoing margin compression
• Lower demand during economic slowdown
• Industry consolidation

In this environment, temporary insolvency may become permanent if businesses cannot recover margins.

What Advisors Should Be Doing Now

For lawyers and accountants, early identification is critical. Advisors should encourage their clients to focus on:

• Reviewing margins and pricing assumptions
• Monitoring cash flow forecasts
• Assessing contract exposure
• Tightening cost control
• Reducing discretionary capital expenditure
• Building cash reserves
• Seeking early restructuring advice

The next 12 to 18 months will be challenging for many businesses. The fuel crisis is likely to create sustained pressure across multiple sectors, and for many businesses, the impact will unfold gradually rather than all at once.

Some clients will manage through, others may need to restructure, and some will face a higher risk of insolvency. Early conversations and proactive planning will be crucial, and trusted Advisors who stay close to their clients will be in a better position to help guide them.

If you’ve got a client who is under increasing pressure, reach out to us today for a confidential discussion.

By Timothy Pope, Senior Manager

This engagement involved a resort and restaurant operating as part of a larger golf course. Confidentiality has been maintained throughout.

Background

The director contacted us directly via a cold call while seeking urgent advice. He had approached several firms for guidance.

Through that initial scoping conversation, and a quick turnaround with tailored advice, they felt comfortable enough to move forward with B&T Advisory, even though there was no existing relationship or referral.

The Challenges

There were several moving parts that made this engagement challenging:

• A winding up application had already been lodged by the ATO. That meant the clock was ticking. If nothing happened, there was a court date and the ATO was pushing for liquidation.
• The director and related entities were fairly well known in the state, so media attention was a real risk.
• The business employed around 48 staff. That’s a significant payroll, with associated liabilities to understand quickly.
• The operation itself included a licensed restaurant, pre-booked guests, and scheduled functions. Simply shutting it down would have created immediate disruption and reputational fallout.
• The director wasn’t actively involved in day-to-day operations. They had multiple ventures and limited availability, so we relied heavily on senior management at the resort. That added complexity because decisions still needed to flow back up the chain of command. For example, managers knew which utilities existed and how the property ran, but authority to sign off still rested with the director, and later the administrator.

Strategy and Solution

Given the winding up application and the director’s ineligibility for a small business restructuring process, the options were limited. The only viable path was voluntary administration, with the ultimate goal of proposing a deed of company arrangement (DOCA).

Timing was tight. The process needed to begin almost immediately to meet statutory deadlines before the court hearing. Rather than taking on trading ourselves, which would involve significant cost and operational responsibility, we licensed the business to a related entity. This shifted day-to-day trading, supplier relationships, and operational risk to the licensee.

We worked quickly with trusted local lawyers to draft the licence agreement. This approach reduced costs, limited disruption, and ultimately supported a better return to creditors. A registered valuer was also engaged to assess the business assets and value.

There was some consideration of offering the business for sale, but that wasn’t feasible. The premises were owned by another entity controlled by the director, and they weren’t prepared to allow a new tenant. That effectively narrowed the path to voluntary administration followed by a DOCA proposal from the director.

Outcomes

The outcomes were strong, particularly given the circumstances:

• The licensing arrangement allowed trading to continue with little to no disruption.
• Existing bookings and functions went ahead as planned, essentially business as usual.
• All staff were retained and continued accruing entitlements.
• The DOCA delivered a better return to creditors than liquidation would have.
• Employee commissions and superannuation totalling around $190,000 were paid in full.
• The entire voluntary administration to DOCA process was completed in just 16 business days, a very quick turnaround driven by a coordinated team effort.

How the business reached this point

The director had multiple businesses and competing priorities.

There were also indications that professional advisors weren’t being engaged consistently. By contrast, once we were engaged, we immediately brought together a team of lawyers and other specialists to handle licensing arrangements, security issues, creditor claims, and the DOCA itself.

The tax debt exceeded $4 million, so it’s likely there had been significant prior communication from the ATO. The key issue appeared to be leaving it too late to seek structured external advice. Timing was critical, had the director contacted us even a day later, the court process may have overtaken the voluntary administration pathway.

Key takeaways

• Seek external advice early,  particularly when dealing with tax liabilities.
• Maintain trusted professional advisors across accounting and legal matters.
• For operational businesses, a hands-on approach from directors is important.
• Acting quickly can preserve trading, protect staff, and improve creditor outcomes.

In this case, rapid engagement, tailored advice, and a practical licensing strategy allowed the business to continue operating, preserved jobs, and delivered a significantly better outcome than liquidation.

By Travis Pullen 

From 1 July, Payday Super changes the timing of superannuation payments, aligning them with payroll instead of quarterly deadlines. Employees will now need to be paid their superannuation contribution within seven business days of payday.

At a policy level, it’s straightforward; the reform is explicitly aimed at reducing unpaid and underpaid super. Under a quarterly system, super can be delayed, with no immediate visibility. Payday Super removes that buffer.

What’s more, the reform is also about enforcement capability, as the ATO can match payroll and super payments in near real time, which will allow earlier intervention when payments are missed.

Whilst the Payday Super scheme is designed to protect employee entitlements and to provide a future-focused way to improve retirement outcomes, it’s important we step through what this all means in practice.

It’s likely we’ll see a structural shift in business cash flow, compliance, and insolvency risk.

The end of the Quarterly Buffer

At its core, Payday Super removes what has effectively operated as a 90-day funding buffer.

Previously, businesses could manage superannuation obligations quarterly. In practice, this created a window, sometimes used strategically, sometimes out of necessity, where cash could be deployed elsewhere before super liabilities were called in.

That flexibility disappears under the new policy, and what this really does is bring cash flow pressures forward.

Forecasts that might have looked manageable under a quarterly system will start to feel pressure, and the impact will be most acute in sectors already operating on tight margins – hospitality, retail, construction, and transport.

Where It Will Hit the Hardest

For these businesses, what was once a timing issue will turn into a solvency issue.

The consequences are predictable:

• Supplier payments pushed out
• Tighter creditor terms
• More pressure moving through the supply chain

This introduces a broader ecosystem risk. As one business defers supplier payments to meet super obligations, those suppliers, often facing the same pressures, may in turn experience their own liquidity constraints.

The result is a potential “knock-on effect” across supply chains, particularly in interconnected SME sectors.

Earlier Insolvency Decisions

The Payday Super Scheme is likely to bring forward critical decisions for Business Directors. Instead of thinking, “We’ve got until the next quarter,” it becomes, “We’ve got to fund this next pay run, including super.”

For businesses already on the edge, this is the sort of change that can “sink the boat,” or at least force a call earlier than they otherwise would have made.

This has two key implications:

1. Earlier tipping points – Businesses already “teetering” may be pushed into external administration sooner.
2. Accelerated advisory engagement – Accountants and lawyers will need to identify and act on distress signals earlier.

Enforcement and Director Exposure

Perhaps the most immediate and material shift is in enforcement risk.

Superannuation has always been an area of heightened director exposure through Director Penalty Notices (DPNs). Payday Super amplifies that risk by increasing both the frequency and immediacy of trigger points.

Directors who fall behind on super obligations face:

• Faster escalation to DPNs
• Increased likelihood of personal liability
• Reduced time to respond before enforcement action

Early Warning Signs for Advisors

For referral partners, like lawyers and accountants, this new scheme will place greater importance on early detection.

Warning signs are likely to appear sooner and with greater frequency, including:

• Cash flow forecasts that cannot sustain super payments each cycle
• Increasing reliance on short-term finance, such as credit cards
• Delayed supplier payments
• Repeated or emerging super payment delays visible through reporting systems

What was once a compliance issue that unfolded over months can now move into personal exposure within a single reporting cycle.

More positively, we always see those earlier conversations around solvency leading to a greater likelihood of achieving workable restructuring outcomes.

The Outlook

Payday Super isn’t introducing a new cost; businesses were always required to pay super. What it does is remove flexibility around timing.

For lawyers and accountants, the practical takeaway is clear expect earlier distress signals and faster escalation of enforcement. But above all expect a need for earlier intervention.

By Peter Biazos 

There’s been a noticeable shift in how the ATO is approaching debt collection. We are seeing across the board that enforcement activity is increasing.

So, what’s driving this shift?

Well, according to ATO-released figures in July last year, there is still more than $50 billion sitting in unpaid tax debt, and this huge sum is what’s driving the aggressive recoupment approach, which in turn is shaping the current context.

DPNs and Wind-Ups on the Rise

Director Penalty Notices (DPNs) are being issued at pace.

According to a recent report from The Daily Telegraph: “Between July and December 2025 alone, the ATO triggered 739 insolvencies nationwide – 666 company wind–ups and 73 personal bankruptcies.” 

The previous year recorded record highs for DPNs, and from our perspective, it’s clear that this trend is not slowing down.

What’s catching many directors off guard is that DPNs are no longer limited to large tax debts. They’re being issued for relatively small amounts, sometimes under $10,000. In practice, this means directors are being exposed to personal liability far earlier than they expect.

In many cases, the first sign of trouble is a phone call saying there are only days left to act.

Credit Reporting Continues to Increase

Another lever the ATO is pulling more frequently is credit reporting. Once a tax debt passes a certain threshold, the ATO can report it to credit bureaus. That information then shows up in company searches, making it harder to obtain finance or trade credit.

This isn’t just about reporting; it’s being used strategically to push businesses to the table and force engagement.

Industries Feeling the Strain

Some industries are being hit harder than others. Transport continues to feature heavily, but there’s also growing activity in mining services, an industry many wouldn’t expect to be under strain.

Behind the scenes, contract delays and deferred projects are creating cash flow issues, even where contracts haven’t technically been cancelled. In some cases, work has been pushed out by years, leaving businesses exposed in the meantime. The expectation is that more insolvency activity will emerge in this space as the year goes on.

Common Director Mistakes

When it comes to personal liability, the mistakes are often basic but costly.

Ignoring ATO correspondence is a big one. Many notices are still issued by post, and timeframes start from the date they’re sent, not when they’re opened. Some directors assume it’s just another routine letter and leave it unopened. But DPNs aren’t subtle. They’re in big, bold, different colours, and can’t be ignored!

Outdated addresses, poor communication with accountants, and a general lack of urgency all contribute to the problem. While directors are more aware of personal liability than they were a few years ago, DPNs still come as a shock to many, especially when they arrive unexpectedly and require immediate action.

Even One Missed Payment Can Trigger Action

Even businesses that believe they’re doing the right thing aren’t immune. Repayment arrangements are being enforced strictly, and a single missed or late payment can have serious consequences.

Missing a payment, even briefly, can result in the arrangement being terminated and enforcement action commencing almost immediately. Once that happens, there are limited options to address it.

Why SBRs Are Being Rejected

Small Business Restructurings (SBRs) are also facing tougher scrutiny. The biggest issue?

In my experience, compliance history is the big one.

Failure to lodge BAS or tax returns, or a history of poor compliance, makes approval difficult. Director loan accounts are another red flag.

If the ATO sees director’s loan accounts and ATO debt rising from their perspective, that signals poor financial decision-making and weak governance.

The ATO is also digging deeper into future viability. They’re reviewing and requesting cash flows now for forecasts and questioning whether a business will  be viable  going forward.

What the ATO Wants to See

For struggling but cooperative businesses, the fundamentals still matter.

The ATO wants to see lodgements being done on time. Cash flow forecasts are critical if the business intends on trading on. Profitability isn’t always required, but ongoing losses are a major concern.

Statutory Demands Are Serious

Ignoring ATO action is not an option. Statutory demands remain one of the most serious tools in the ATO’s kit.

Once issued, directors have 21 days to deal with it as required. If no payment or agreement is reached within that window, the ATO can move quickly to Court and apply to wind up the company.  Ignoring a statutory demand is effectively inviting enforcement.

What Advisors Should Be Saying This Year

“Get in early.”

 By the time many businesses ask for help, it’s already too late. But we know that the earlier advisors and specialists are brought in, the more options are available.

Final Thoughts

We are certainly not criticising the ATO’s approach. It’s important that our Referrers and their Clients recognise the environment we’re operating in. Enforcement is increasing, and directors are being held to account more quickly and more personally than before.

For small businesses and their advisors, the message is clear: act early.