Can I lose my home if my company goes broke?

The company owes the debt, not you

If you operate a business through a company, the company owns the assets of the business and is liable for any debts incurred in running that business. You, as a director or shareholder, are generally not personally liable for the company's trading debts and other liabilities. Company insolvency does not automatically give trade creditors or suppliers a claim against your house or other personal assets.

But that separation is not complete. Banks or suppliers may require you to give a personal guarantee against any unpaid liabilities of the company. The effect of this is that, if the company cannot pay, you can be legally responsible for the debts. If your guarantee is secured against your home, the creditor may enforce that security if the company fails and cannot pay the debt you guaranteed.

List every personal guarantee you have signed

Check every loan agreement, equipment finance contract, trade credit application and property lease. A personal guarantee means you become responsible for the company's debt if the company cannot pay, and guarantees are often secured against personal assets such as your home. You may have signed documents years ago and forgotten their terms.

Write down the creditor, the amount guaranteed and whether the guarantee is secured. If the company enters liquidation or cannot pay, the creditor can pursue you personally regardless of the company's position. Know your total exposure now, before a creditor demands payment from you personally or registers an interest over the family home.

Source: Official guidance

Check company tax lodgements are current

If your company doesn't pay certain liabilities by the due date, we can recover these amounts from you personally as a current or former company director. You may become personally liable for your company's unpaid amounts of pay as you go (PAYG) withholding, goods and services tax (GST), and super guarantee charge (SGC). This is a director penalty, and it is your personal debt whether or not the company goes into liquidation.

We can recover the penalty amounts from you 21 days after we issue you a director penalty notice (DPN). These tax debts can't be released: GST, PAYG withholding, super guarantee charge (SGC), director penalty notices. If unpaid, the ATO can take recovery action against you personally, including potential garnishee or legal proceedings that could reach your assets, including your home. Check your company's lodgement status and payment history today.

Understand insolvent trading liability

If you allow the company to incur further debts when it is insolvent, you may become personally liable for the company's debts. The court may order that the director is personally liable to pay compensation to the company equal to the amount of the loss suffered as a result of the director failing to prevent the company from incurring debts while it was insolvent. A liquidator or creditor can bring a claim against you personally to recover losses caused by insolvent trading.

A company is insolvent if it cannot pay its debts when they fall due. If the company has overdue supplier invoices, late tax payments or is relying on delayed receipts to cover commitments already due, seek advice now. Once debts are incurred while insolvent, your options narrow and your personal exposure increases. This risk exists whether or not you gave a personal guarantee.

Take stock today before the position worsens

Pull together every guarantee, check the company's tax account, confirm your director loan balance if you have withdrawn funds, and review whether the company is paying debts as they fall due. If the company is under financial pressure, get advice about your personal exposure before a notice arrives or a liquidator is appointed.

CRP coordinates appropriately qualified professionals who can assess your position, explain which debts may follow you personally and identify options to protect your interests. Use the contact form below to explain your situation. No article decides whether your home is at risk; that assessment requires review of the actual guarantees, director penalties and company solvency position and qualified advice tailored to your circumstances.