Director Advisory & Safe Harbour
Insolvency & Bankruptcy
Key Takeaway
The safe harbour provisions under section 588GA of the Corporations Act provide directors with protection from personal liability for insolvent trading if they are developing a course of action that is reasonably likely to lead to a better outcome for the company.
The safe harbour provisions under section 588GA of the Corporations Act provide directors with protection from personal liability for insolvent trading if they are developing a course of action that is reasonably likely to lead to a better outcome for the company. We advise directors on accessing safe harbour protections and navigating the path to company recovery.
Introduced to encourage directors to restructure distressed companies without the immediate threat of insolvent trading liability, safe harbour allows directors to take control of the company's financial situation and develop a turnaround plan. However, strict conditions apply, and the protection is not a blanket exemption from director duties.
Accessing Safe Harbour Protections
To access safe harbour under section 588GA, directors must ensure the company is complying with its tax reporting obligations (including lodgement of BAS, IAS, and tax returns), maintain proper financial records, and engage a suitably qualified adviser to support the development of a turnaround plan. The directors must then develop a course of action that is reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. There is no requirement to guarantee success — only that the course of action is genuinely and reasonably undertaken. Directors must continue to monitor the company's financial position and adjust the plan as circumstances change.
The Turnaround Process
Effective turnaround planning involves a detailed assessment of the company's financial position, cash flow forecasting, identification of cost reduction and revenue improvement opportunities, negotiation with creditors and financiers, and development of a realistic timeline for recovery. During the safe harbour period, directors retain control of the company but must keep accurate records of their decision-making process and the advice received. Regular communication with creditors, particularly the ATO as a significant creditor in many cases, is essential to maintain support for the turnaround effort. We help directors structure and document their turnaround plans to maximise the protection available.
When Safe Harbour Is Not Available
Safe harbour protections do not apply in certain circumstances, including when the company has already entered administration or liquidation, when the debt is under a director penalty notice and the director has not taken specified actions, or when the director fails to comply with employee entitlements obligations. Safe harbour also does not protect directors from liability for other breaches of the Corporations Act, including their general duties of care and diligence, good faith, and proper purpose. Directors should seek legal advice early — well before formal insolvency becomes inevitable — to ensure they have the best opportunity to access safe harbour and restructure the company successfully.
Director Advisory & Safe Harbour FAQs (Queensland Law)
What is safe harbour under s 588GA of the Corporations Act?
Our team helps clients with matters under section 588GA provides directors with protection from insolvent trading liability if they are developing a course of action reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. The director must ensure tax compliance.
What is insolvent trading under the Corporations Act?
At our firm, insolvent trading occurs when a director allows a company to incur a debt while the company is insolvent or becomes insolvent by incurring that debt. Directors have a positive duty under s 588G to prevent insolvent trading. Penalties include personal liability and director disqualification.
What is the qualified adviser requirement for safe harbour?
At our firm, to access safe harbour, directors must appoint a suitably qualified adviser to support the development of a turnaround plan. The adviser should have appropriate expertise in corporate recovery, financial management, or the specific industry.
What is a turnaround plan in safe harbour?
At our firm, a turnaround plan is a course of action that is reasonably likely to lead to a better outcome for the company than administration or liquidation. It should include cash flow forecasts, cost reduction strategies, creditor negotiation plans, and realistic timelines for recovery.
What are director penalty notices (DPNs)?
Directors and company officers have important legal duties. Our team advises directors on meeting their obligations. Penalty Notices (DPNs) are issued by the ATO to directors for unpaid PAYG withholding, GST, and superannuation. Directors have 21 days to respond by paying, appointing a small business restructuring practitioner, or placing the company into administration or liquidation.
Director Advisory & Safe Harbour Services
- Safe harbour eligibility assessment and implementation advice
- Turnaround plan development and documentation
- Financial modelling and cash flow forecasting review
- Appointment of suitably qualified adviser for safe harbour
- Director ongoing obligations during safe harbour period
- Communication with creditors, employees, and stakeholders
- Tax debt management including payment plans and director penalty notices
- ASIC reporting obligations and disclosure requirements
- Transition from safe harbour to formal insolvency if required
- Small business restructuring under "Simpler Corporate" provisions
- Director coaching on insolvency risk management
- Post-restructuring implementation and monitoring
Last updated: July 2026
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