Asset Protection Strategies Every Advisor Should Know in the Face of Rising Insolvency

Australia is experiencing a sharp rise in both business and personal insolvency. In FY2024, more than 11,000 companies entered external administration - the highest number recorded in over a decade. Forecasts for FY2025 suggest this number could rise beyond 15,000, reflecting a dramatic shift in economic conditions. Several key factors are driving this trend:

• Renewed ATO enforcement, with over 26,000 Director Penalty Notices issued
• High interest rates and inflation squeezing margins
• Expiry of COVID-era relief and return to full trading conditions
• Weakening consumer confidence and tighter cash flow across industries

The most vulnerable sectors include construction, hospitality, and professional services, but no industry is immune. Advisors must treat this as a signal to initiate proactive conversations with clients about risk exposure and long-term financial safeguards. These trends underscore the urgent need to understand insolvency in Australia and its implications for your clients.

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Legal and Regulatory Developments

Recent legal updates reinforce the urgency of early action:

• Safe Harbour laws provide directors a shield from personal liability if they develop a viable turnaround plan
• Expanded DPN regime now captures GST obligations, not just PAYG and super
• Anti-phoenixing provisions penalise below-market asset transfers intended to defeat creditors
• Personal insolvency reform proposals suggest raising thresholds and introducing simplified processes for low-asset cases

Understanding these changes allows referrers to give informed, up-to-date advice that aligns with current risk exposures and helps in protecting assets more effectively.

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Case Study: Porter Davis Homes vs. Okami Restaurants

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What Worked vs What Went Wrong

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Lessons for Businesses & Professional Advisors

1.  Timing Is Everything

• Early intervention (Okami) allows time for a controlled restructure.
• Delayed action (Porter Davis) left no runway, triggering a disorderly collapse.

2. Structure to Protect Assets

• Franchising or subsidiary models (Okami) help isolate risk.
• Holding customer funds without trust protections (Porter Davis) exposes firms to catastrophic legal and PR consequences.

3. Stakeholder Management

• Paying employees, maintaining supplier trust, and communicating clearly (Okami) boosts chances of survival.
• Ignoring customer rights and regulatory duties (Porter Davis) exacerbates collapse consequences.

4. Choose the Right Insolvency Tool

• VA enables trade-on and restructuring.
• Liquidation may be appropriate for terminal businesses, but it cuts off many recovery options.

5. Regulatory Preparedness

• Stay compliant with consumer protection (insurance, trust funds).
• Advisors must flag these as red lines – breaches can be fatal.

6. Innovation in Insolvency

• Post-collapse licensing, partial asset salvages, and third-party builder tie-ups (Porter Davis) show that liquidation needn’t mean total value loss – creativity matters.

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Why Asset Protection Must Be Proactive – Not Reactive

The contrasting outcomes of Porter Davis and Okami offer a powerful reminder that insolvency does not happen overnight – it builds over time, and the difference between survival and collapse often comes down to how early and effectively a business protects its assets.

In Porter Davis, asset protection failure, particularly around consumer deposits, amplified the damage. By the time liquidation was chosen, options were limited, stakeholder trust was shattered, and even well-meaning directors couldn’t salvage the core business. In contrast, Okami’s proactive use of voluntary administration, commitment to trading through, and clear separation of risk via franchising protected brand equity, staff continuity, and stakeholder value.

The critical lesson? Asset protection strategies must be front-loaded and not something businesses or their advisors scramble to implement when collapse is imminent. This includes not only legal and financial structures but also compliance, governance, and stakeholder communications. Directors, founders, and professional advisors must actively monitor red flags, engage restructuring tools early, and preserve the “intangible assets” – like goodwill, staff trust, and customer loyalty – that underpin business continuity.

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Learn How to Do This Right – Join Our Upcoming Seminar

If you found the lessons from these case studies insightful and ant to help your clients protect their assets more effectively, we invite you to attend our upcoming lunch Seminar and hear directly from experienced lawyers who deal with insolvency, business restructuring, and asset protection daily.

We’ll cover:

• Latest insolvency trends and legal updates
• Practical asset protection strategies
• Real case studies and early warning signs
• Q&A tailored to professionals like you

This is your opportunity to strengthen your network, empower your clients, and sharpen your knowledge of asset protection in Australia.

Spaces are limited – RSVP now to secure your seat here.

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