This plain-English guide explains what going concern means for Australian companies and Queensland incorporated associations, why an ATO debt or payment plan does not by itself mean insolvency, and why up-to-date Xero or MYOB accounts are the foundation for informed decisions about the organisation's future.
"Going concern" is the accounting assumption that a company or association will keep operating for at least the next twelve months, paying its debts as they fall due. Owing money to the ATO, or being on an ATO payment plan, does not by itself mean an organisation has failed that test or is insolvent. The real question is whether the organisation can keep paying what it owes, when it owes it, and the only way to answer that is with up-to-date accounts.
Introduction
We regularly receive emails that begin something like this:
"We've fallen behind with the ATO and our superannuation payments. Our accountant says we're breaching the Corporations Act and could go to jail. We don't know what to do."
The writer rarely uses the words "going concern". Most have never heard them. They describe a tax problem or a super problem, and they are usually frightened, embarrassed and a little offended by how the conversation went.
That reaction is understandable. Most directors and committee members feel the organisation is part of them. When someone suggests it might fail, it feels personal.
This article explains, calmly, what going concern actually means, why it matters for your financial statements, what insolvency is (and isn't), and why well-kept accounts in Xero or MYOB are your best protection.
What is going concern?
Going concern is an assumption that sits underneath every set of financial statements. It means the people preparing them expect the organisation to keep running for the foreseeable future, which is generally at least twelve months from the end of the financial year.
That assumption changes how everything is valued. A delivery van is recorded at its cost less depreciation because you expect to keep using it. Loans are split into current and non-current because you expect to repay them over time, as agreed.
If the organisation were about to close, those numbers would look very different. The van would be worth only what it could be sold for tomorrow. Every loan might become payable at once.
So going concern is not a judgement about whether you are a good business owner. It is a question about which set of numbers gives a true picture.
Who is responsible for assessing going concern?
The directors or committee are. Under AASB 101 Presentation of Financial Statements, those preparing the financial statements must assess whether the organisation can continue as a going concern. If there are serious doubts, they must say so in the notes to the financial statements.
The auditor or reviewer checks that assessment. Under ASA 570 Going Concern, an auditor must gather enough evidence to decide whether management was right to prepare the statements on a going concern basis, and whether there is a "material uncertainty" that readers need to be told about.
A common misunderstanding is that the auditor decides whether your business survives. They don't. The auditor's job is to make sure the financial statements tell readers honestly about any serious doubt. The decisions about the future stay with you.
What makes an auditor ask about going concern?
Auditors / Accountants look for events or conditions that, on their own or together, suggest the organisation might struggle to keep paying its debts. In practice, the ones we see most often in small companies and associations are:
tax debts or unpaid superannuation building up over several quarters
several years of losses in a row
loans falling due with no plan to repay or refinance them
suppliers who will only deal on cash-on-delivery terms
losing a major customer, grant or funding source
relying heavily on one or two key people
accounts that are months or years behind, so nobody knows the true position
That last point matters more than most people realise. When the books are behind, the auditor cannot tell whether the organisation is fine or in trouble. Missing records are themselves a warning sign.
Auditors also look for mitigating factors: things that reduce the risk. A bank that has agreed to extend a facility, a director willing to lend money, assets that could be sold without disrupting the business, or a realistic payment plan that is being kept up to date all count. These don't make the problem disappear, but they matter.
What is insolvency?
Insolvency is when a company or person can't pay their debts when they are due. That is how ASIC explains it, and it follows the definition in section 95A of the Corporations Act 2001 (Cth): a company is solvent if it can pay all its debts as and when they become due and payable.
Notice what that definition is about. It is mainly about timing and cash flow, not about whether you owe money at all. Almost every business owes money to someone at any given moment. Owing is normal. Being unable to pay on time, with no realistic way to fix it, is the problem.
If a company is insolvent, the options include liquidation, voluntary administration, receivership and, for eligible small businesses with liabilities under $1 million, the small business restructuring process introduced on 1 January 2021.
Does an ATO payment plan mean we're insolvent?
No — not by itself.
One of the biggest misconceptions we encounter is that any ATO debt means the organisation is finished. That is not correct.
The ATO offers payment plans because it recognises that viable businesses sometimes fall behind. A payment plan that has been agreed, and is being paid on time, shows that the organisation is managing the debt rather than ignoring it. For many small businesses, it is a sensible way through a difficult year.
That said, a payment plan is not a guarantee of solvency either. Whether the organisation can continue depends on the whole picture:
Can it meet the payment plan instalments and keep up with its current tax, super, wages and suppliers?
Is the business making enough to cover its ongoing costs?
Is the debt shrinking over time, or growing?
Professional judgement is required. The answer depends on cash flow forecasts, not on the existence of the debt.
"But we only owe the ATO" — why legislation still matters
We often hear: "We don't owe any suppliers. It's only the ATO and super, so it isn't really a problem."
Here is the gentle reality. The ATO and your employees' super funds are creditors like anyone else. In some ways the law treats these debts more seriously, not less.
For companies, the main points are:
Directors' duty not to trade while insolvent. Under section 588G of the Corporations Act 2001, directors can be personally liable if the company incurs new debts while insolvent. This applies regardless of who the creditor is.
Director penalty notices. Directors can become personally liable for a company's unpaid PAYG withholding, GST and superannuation guarantee charge. If these amounts aren't reported within three months of their due date, the director's options for avoiding personal liability become much more limited.
Safe harbour. The Corporations Act gives directors some protection while they genuinely pursue a plan that is reasonably likely to lead to a better outcome. But that protection generally depends on the company keeping proper financial records and keeping employee entitlements and tax lodgements up to date.
For incorporated associations, the same insolvency test applies. Part 10 of the Associations Incorporation Act 1981 (Qld) lets the Supreme Court order an association to be wound up if it "is unable to pay its debts as and when they become due and payable" (s 91(c)). That is the same test the Corporations Act uses for companies. On that ground a creditor can apply to the court (s 91A), and the ATO is a creditor.
Part 10 also brings in the Corporations Act processes, with changes to suit associations:
voluntary administration under Part 5.3A of the Corporations Act (s 89)
voluntary winding up by special resolution of members (s 90)
winding up by the Supreme Court (s 91B)
Committee members also have their own duties under the Act, including acting with care and diligence and keeping financial records that correctly record and explain the association's transactions and financial position. So an association that "only owes the ATO" still faces the same question as a company: can it pay its debts when they fall due?
None of this is said to frighten anyone. Penalties exist, but they are most often a problem for directors and committees who ignore the situation. Regulators respond very differently to people who identify a problem early and act on it.
Why the conversation often goes badly
In practice, we see two things happen.
Some advisers lead with legislation and penalties. The intent is usually to create urgency. The effect is often that the client stops talking. They become too scared or too offended to share the full picture, and the problem gets harder to fix.
At the same time, many directors and committee members treat the organisation's finances as their own. When the business struggles, it feels like a personal failure. That makes it hard to look at the numbers objectively.
Most directors don't start a business because they enjoy bookkeeping. They start it because they are good at what they do. Falling behind on the paperwork is common, and it is fixable.
The best path forward: get the accounts up to date
You cannot make good decisions about your organisation's future without knowing where it stands today. That is why the first step is almost always the same: get the accounts in Xero or MYOB properly maintained and reconciled.
Up-to-date accounts let you answer the questions that actually matter:
How much do we really owe, and to whom?
What comes in and goes out each month?
Can we afford the ATO payment plan alongside our current obligations?
Is the business profitable once everything is recorded properly?
Sometimes the answer is reassuring. We regularly find that once the books are reconciled, the position is better than the directors feared. Missing income gets recorded, duplicated expenses are removed, and the debt turns out to be manageable.
Sometimes the answer is harder. Even then, knowing early gives you the most options, whether that is a revised payment plan, new funding, a restructure or, if needed, early advice from a registered liquidator or restructuring practitioner.
Either way, the decision is made on facts rather than fear.
Example
A small café company had fallen behind on its BAS lodgements and superannuation for about eighteen months. The director assumed the business was "going under" and stopped opening letters from the ATO.
Once a bookkeeper reconciled the Xero file, it turned out that several large supplier payments had been recorded twice, and a quarter's takings had never been entered. The café was trading at a small profit. The real problem was that nobody had lodged anything.
With accurate figures, the director lodged the outstanding BAS returns, entered an ATO payment plan the business could afford, and brought super up to date. The going concern question became a cash flow plan, not a crisis.
Common misunderstandings
❌ "Going concern" means the auditor thinks we're dishonest. It doesn't. It is a technical question about whether the financial statements should be prepared on the basis that the organisation will keep operating.
❌ Any ATO debt means we're insolvent. No. Insolvency is about being unable to pay debts as they fall due. A managed payment plan is often part of a sensible recovery.
❌ Only debts to suppliers count. Tax and superannuation are debts too, and directors can become personally liable for some of them.
❌ If we don't look at the numbers, the problem stays small. The opposite is usually true. Delay removes options and increases personal exposure.
❌ A material uncertainty paragraph in the audit report means the business is closing. It means readers are being told there is significant doubt that has been properly disclosed. Many organisations continue trading successfully after one.
Practical tips
✔ Reconcile the bank accounts in Xero or MYOB every month.
✔ Lodge BAS and STP on time, even if you can't pay in full. Lodging keeps your options open.
✔ Contact the ATO early if you can't pay, and keep any payment plan you agree to.
✔ Prepare a simple twelve-month cash flow forecast: money in, money out, and the tax and super due each month.
✔ Minute the discussion. Directors and committees should record that they've considered the organisation's financial position and what they've decided to do.
✔ Keep the auditor independent. Whoever brings the books up to date should not also audit or review them.
✔ Get advice early if the forecast shows you can't meet your debts as they fall due.
👉 If your organisation is behind on its accounts, our unaudited financial statements page explains the errors we most commonly find, and how to get back on track.
Going concern is not an accusation. It is a question every set of financial statements has to answer: will this organisation keep going?
An ATO debt does not answer that question on its own, and neither does fear. Accurate, up-to-date accounts do. They let directors and committee members see their real position and make informed decisions about what comes next.
If your company or association is behind and you're not sure where you stand, we're happy to talk it through, without judgement.
Technical Note for Auditing Students: Audit Reports under ASA 570
The going concern assessment is shared between management and the auditor:
AASB 101 requires management to assess whether the entity can continue as a going concern, looking at least twelve months from the end of the reporting period, and to disclose material uncertainties.
ASA 570, paragraph 17 requires the auditor to evaluate whether sufficient appropriate audit evidence has been obtained and to conclude on whether management's use of the going concern basis of accounting is appropriate.
ASA 570, paragraph 18 requires the auditor to conclude whether a material uncertainty exists, meaning that the potential impact and likelihood of the events or conditions are such that disclosure is needed for the financial report to be fairly presented (or, under a compliance framework, not misleading).
A useful exam distinction: an ATO debt is an event or condition that may cast doubt on going concern. An agreed payment plan that is being complied with is a mitigating factor. Neither, on its own, determines the auditor's conclusion. The auditor weighs the evidence, including cash flow forecasts and management's plans, and applies professional judgement.
Also note that insolvency (a legal test under s 95A of the Corporations Act 2001) and going concern (an accounting basis of preparation) are related but are not the same thing.
References
Australian Accounting Standards Board. AASB 101 Presentation of Financial Statements.
Auditing and Assurance Standards Board. ASA 570 Going Concern.
Corporations Act 2001 (Cth) ss 95A, 286, 588G, 588GA.
Associations Incorporation Act 1981 (Qld) pt 10, ss 89, 90, 91, 91A, 91B.
Australian Securities and Investments Commission. Insolvency (regulatory resources) and INFO 41 Insolvency: A glossary of terms.
Academic References
APA 7th Edition
O’Connor, J. (2026, October 27). What is going concern? ATO debts, insolvency and your books. J O’Connor Pty Ltd. https://www.joconnorptyltd.com/blog/what-is-going-concern-ato-debts-insolvency-and-your-books
Harvard Referencing
O’Connor, J. 2026, What is going concern? ATO debts, insolvency and your books, J O’Connor Pty Ltd, viewed 27 October 2026, https://www.joconnorptyltd.com/blog/what-is-going-concern-ato-debts-insolvency-and-your-books.
AGLC4 (Australian Guide to Legal Citation)
Jason O’Connor, ‘What Is Going Concern? ATO Debts, Insolvency and Your Books’ (Blog Post, J O’Connor Pty Ltd, 27 October 2026) https://www.joconnorptyltd.com/blog/what-is-going-concern-ato-debts-insolvency-and-your-books.
Chicago Style
O’Connor, Jason. “What Is Going Concern? ATO Debts, Insolvency and Your Books.” J O’Connor Pty Ltd. October 27, 2026. https://www.joconnorptyltd.com/blog/what-is-going-concern-ato-debts-insolvency-and-your-books.
This article is general information, not financial, legal or tax advice. Directors concerned about insolvency should seek advice specific to their circumstances, including from a registered liquidator or restructuring practitioner where appropriate.