Last updated: 3 November 2026. Written by the FreeMyCloud team.
Checked against ASIC media release 26-258MR and the Report 843 summary, and the Corporations Act 2001, Corporations Regulations 2001, GST Act 1999 and Personal Property Securities Act 2009 on the Federal Register of Legislation, on 3 November 2026.
- When a customer company is wound up, unpaid invoices become a claim ranked by the Corporations Act 2001, not a collection job.
- ASIC’s review of 26,664 liquidation appointments, published 27 October 2026, found a dividend reached ordinary unsecured creditors in 5.3% of finalised liquidations, at a median of 9.8 cents in the dollar.
- Half of finalised liquidations realised no more than $10,000 in assets, and a quarter realised nothing.
- GST already remitted on a written off invoice can return as a decreasing adjustment of one eleventh under section 21-5 of the GST Act, unless you account on a cash basis.
Unpaid invoices are an ordinary part of trading until the customer’s company is wound up. Then they stop being a cash flow problem and become a claim in a statutory queue. On 27 October 2026 the Australian Securities and Investments Commission published media release 26-258MR and Report 843, a review of 26,664 liquidation appointments, and it shows where that queue ends: ordinary unsecured creditors received a dividend in 5.3% of finalised liquidations. This is what ASIC found, where unpaid invoices sit in the order of payment, and what your books decide long before a liquidator arrives.
What happened when ASIC reviewed 26,664 liquidations?
ASIC said on 27 October 2026 that it had published Report 843, Review of court and creditors’ voluntary liquidation process: 2021-2025, covering 26,664 grouped appointments between 1 July 2021 and 30 June 2025. These were not large collapses: 69% of the companies reported liabilities below $1 million, around 90% had five or fewer employee creditors, and the median company was seven years old. ASIC Commissioner Kate O’Rourke said it gives a more detailed picture of those processes and the outcomes achieved.
| What ASIC measured | What Report 843 found |
|---|---|
| Appointments reviewed | 26,664: 7,023 court liquidations, 19,641 creditors’ voluntary liquidations |
| Assets realised | 50% of finalised liquidations realised no more than $10,000; 25% realised none |
| Recovery against debts owed | 46% realised no more than 1% of reported liabilities |
| Dividend to unsecured creditors | Paid in 5.3% of cases, median 9.8 cents in the dollar |
| Total liabilities | $117.2 billion, a median of about $480,000 per appointment |
Source: ASIC media release 26-258MR and the Report 843 summary, 27 October 2026.
What happens when a company goes into liquidation and you are holding unpaid invoices?
Once a winding up begins you cannot keep collecting. The invoice becomes a debt to be proved, and section 555 of the Corporations Act 2001 provides that all debts and claims proved rank equally and, where the company’s property is insufficient, are paid proportionately.
Equal ranking reads fairly until section 556, which lists what is paid ahead of all other unsecured claims: the liquidator’s costs of preserving and realising company property, the costs of a court winding up application, other administration expenses, then employee wages, superannuation and the superannuation guarantee charge, then injury compensation, leave and retrenchment pay. Trade debts come last.
Where do unsecured creditors sit when the money runs out?
Last, and usually with nothing left. In 88.1% of finalised liquidations ASIC found no dividend to ordinary unsecured creditors, with the liquidator either approved no remuneration or paid less than the approved amount, so the liquidator often runs out of money too.
In ASIC’s review, 46% of finalised liquidations realised no more than 1% of reported liabilities. A claim is still worth lodging, but the planning assumption for an unsecured trade debt is zero.
What is the difference between a creditors voluntary liquidation and a court liquidation?
A creditors voluntary liquidation starts with the company itself and made up 19,641 of the appointments reviewed. A court liquidation starts with an application to the court, often by a creditor, and ends worse: 45% began with no estimated realisable assets against 26%, and 70% realised no more than 1% of reported liabilities against 39%.
When does an unpaid invoice become a bad debt?
A bad debt is a decision you record, not something that happens to you. You write the debt off when you form the view on reasonable grounds that it will not be recovered. Leaving it in accounts receivable because nobody wants to make the call overstates your revenue and distorts every report built on it. That is where debtors management earns its keep, though the decision itself belongs with you and your registered tax or BAS agent.
How does a bad debt write off work for GST?
On an accruals basis you have already paid the ATO one eleventh of an invoice the customer never paid. Section 21-5 of the A New Tax System (Goods and Services Tax) Act 1999 gives a decreasing adjustment where you made a taxable supply, the consideration was not received, and you either write the debt off as bad or it has been overdue for 12 months or more. The adjustment is one eleventh of the amount written off or overdue.
Two conditions get missed. Section 21-5(2) denies the adjustment if you account on a cash basis, because the GST was never remitted. And section 21-10 creates an increasing adjustment of one eleventh of anything later recovered, so a surprise dividend has to go back through the BAS.
On an $11,000 invoice including GST, the decreasing adjustment is $1,000. The other $10,000 is an income tax question for your registered tax agent.
What should your credit control look like before unpaid invoices pile up?
Report 843 describes what happens after prevention fails. Credit control is the set of habits deciding who gets terms and how fast you find out when they stop paying.
None of it is complicated, and all of it quietly stops when the bookkeeper is also the owner.
Trading terms and payment terms that exist in writing
Your trading terms are the contract behind every invoice and your payment terms set the clock. If the only statement of either is a line at the foot of the invoice, there is little to rely on when a debt is disputed.
A credit application form before the first job
A credit application form is how you learn the legal entity behind the trading name, and where the company number comes from. You need that number to lodge a claim.
Aged receivables somebody reads every week
Read weekly, an aged receivables report is an early warning system: a customer sliding from the 30 day column to the 60 day column is usually the first visible sign of trouble. Our note on management reports covers the pack it belongs in.
What are your debt recovery options while invoices are overdue?
Debt recovery is available while the company still trades. Both formal steps are legal processes and whether to use either is a question for a solicitor. Your books supply the evidence.
A letter of demand
A letter of demand is a written demand for payment by a stated date. It carries no special statutory status, but it creates a dated record and is usually the point at which a disputed invoice surfaces as disputed.
A statutory demand
Section 459E of the Corporations Act 2001 lets a creditor serve a statutory demand on a company for a debt due and payable and at least the statutory minimum. It must be written, signed by or for the creditor, require payment within the statutory period, and unless the debt is a judgment debt carry an affidavit verifying it. Regulation 5.4.01AAA of the Corporations Regulations 2001 sets that minimum at $4,000 and the period at 21 days.
Does PPSR registration help if a customer is wound up?
If you supply goods on retention of title terms, PPSR registration is what makes the clause survive insolvency. Section 267 of the Personal Property Securities Act 2009 provides that where a company is wound up, a security interest it granted that is unperfected at the relevant time vests in the company immediately before that event. An unregistered claim is lost at the moment you need it. The registration is a legal question; keeping it matched to the customer list in the ledger is bookkeeping.
What does this mean for your bookkeeping?
Report 843 does not ask an owner to become an insolvency expert. It asks for the unglamorous parts of the ledger to be current: invoices raised the day the work is done, receipts reconciled, aged receivables read weekly, and follow up on a schedule. Section 286 of the Corporations Act 2001 requires a company to keep written financial records that correctly record and explain its transactions and financial position, and to retain them for seven years.
This is the work FreeMyCloud has done for Australian businesses since 2010. University-qualified graduate accountants based in the Philippines, working Australian business hours, run the receivables cycle week by week and escalate what needs your decision. They are able to work with Xero, MYOB, QuickBooks, Reckon or the software your industry uses, it costs about 50% less than employing a bookkeeper locally, and it sits alongside your accountant. See our outsourced bookkeeping page or our guide to what a bookkeeper actually does.
FreeMyCloud is not a registered tax or BAS agent and does not lodge. For the director’s side of the same data, see insolvent trading in Australia; for the industries where progress claims make receivables hardest, see builders and contractors. Small business bookkeeping and cloud bookkeeping set out the service.
Want your receivables chased every week without doing it yourself?
A graduate accountant running invoicing, reconciliation and overdue follow up on a documented weekly cycle, ready to start.
Or call 1300 66 88 14, or try the savings calculator. No lock-in contracts.
Frequently asked questions
Can I claim back the GST on an unpaid invoice?
If you account for GST on an accruals basis, section 21-5 of the GST Act gives a decreasing adjustment of one eleventh of the amount, once you write the debt off as bad or it has been overdue for 12 months or more. If you account on a cash basis, section 21-5(2) says the adjustment is not available, because the GST was never remitted. Your registered agent reports it on the BAS.
How do debtor days show that overdue invoices are becoming a problem?
Debtor days measure the average time between issuing an invoice and being paid. The trend matters more than the number. A figure drifting from 35 days to 55 days across a quarter means collections are slowing over the whole ledger, which is a cash flow warning well before any single customer defaults. It is calculated from the same data as the aged receivables report.
Is debt collection worth it for a small unpaid invoice?
That depends on the size of the debt, the agency’s fee basis and whether the customer is still trading, so it is a commercial decision rather than a bookkeeping one. What makes any debt collection route workable is documentation: signed terms, the invoice, proof of delivery and a dated record of follow up. Once a company has entered liquidation, collection stops and the claim goes to the liquidator.
How long should records of an unpaid invoice be kept?
Section 286 of the Corporations Act 2001 requires a company to keep written financial records that correctly record and explain its transactions and financial position and performance, and to retain them for seven years after the transactions covered are completed. A written off invoice is part of that record. Tax record keeping periods are set separately and your registered tax agent can confirm them.
How often do unsecured creditors actually receive a dividend?
In ASIC’s Report 843, released on 27 October 2026, a dividend was paid to ordinary unsecured creditors in 5.3% of finalised liquidations, and where one was paid the median was 9.8 cents in the dollar. ASIC also found 46% of finalised liquidations realised no more than 1% of reported liabilities. Lodging a claim still matters, but the planning assumption should be recovery of nothing.
What is the difference between writing off a bad debt and giving up on it?
Writing off a bad debt is a recorded accounting decision that removes the receivable from the ledger and triggers the GST adjustment under section 21-5. It does not extinguish the debt or stop you accepting payment later. If you do recover part of it, section 21-10 creates an increasing adjustment of one eleventh of the amount recovered, so the recovery is recorded as carefully as the write off.
This article is general information about Australian bookkeeping and reporting obligations, current as at 3 November 2026. It is not tax, financial or legal advice. FreeMyCloud is not a registered tax agent and does not prepare or lodge tax returns. Rates, thresholds and dates change. Confirm your own position with your registered tax or BAS agent.
