How to Protect Your Personal Assets as a Company Director
Being a director of a company in Australia comes with significant responsibilities—and risks. While operating under a Pty Ltd structure does offer some protection through limited liability, your personal assets are not always safe. There are several situations where directors can be held personally liable for company debts or misconduct.
Understanding how to reduce this risk is essential if you want to protect your home, savings, and other personal assets.
Why Your Personal Assets Could Be at Risk
Here are key situations where your personal assets may be exposed:
Personal guarantees on loans or leases
ATO liabilities, such as unpaid GST, PAYG, or super (via Director Penalty Notices)
Insolvent trading—allowing the business to incur debts it can’t repay
Phoenix activity or fraudulent conduct
Unreasonable director-related transactions (e.g. asset transfers)
🧾 Reference: Corporations Act 2001 (Cth) – Sections 588G, 588FDA; ATO Director Penalty Regime
How to Protect Your Personal Assets: 10 Smart Strategies
1. Separate Personal and Business Finances
Keep personal and business accounts, assets, and liabilities completely separate. This creates a clear distinction between the two entities.
2. Avoid Giving Personal Guarantees
Be very cautious when asked to sign personal guarantees for loans, leases, supplier credit, or vehicle finance. If you must sign, understand the risks and try to negotiate limits or expiry clauses.
3. Stay Compliant with the ATO
Lodge and pay PAYG withholding, GST, and superannuation on time. Failure can trigger a Director Penalty Notice (DPN), making you personally liable.
ATO: “Directors can be held personally liable for unpaid PAYG, GST, and super.”
4. Monitor Solvency and Act Early
Directors are legally required to prevent insolvent trading. Use cash flow forecasts and financial reports to assess solvency. If your company is in trouble, seek help early.
5. Use the Safe Harbour Provisions
If the business is struggling but potentially viable, the Safe Harbour regime offers protection from insolvent trading liability—if you take appropriate steps with the help of an adviser.
Reference: Corporations Act 2001 (Cth) – Section 588GA
6. Avoid Preferential or Related Party Transactions
Transferring company assets to yourself or related parties below market value can be reversed by a liquidator, and you may be held personally liable.
7. Use a Discretionary (Family) Trust for Personal Assets
Holding personal assets—such as your family home—in a trust (rather than your personal name) may provide a layer of protection from creditors. Speak to a qualified legal or tax adviser first.
8. Document Director Decisions Properly
Maintain accurate board meeting minutes, cash flow analyses, and professional advice received. This helps demonstrate that you acted responsibly and in good faith.
9. Engage Professional Advice Regularly
Accountants, lawyers, and insolvency professionals can identify risks you may not be aware of and help you act in a way that reduces exposure.
10. Consider Director & Officer (D&O) Insurance
This insurance can cover legal costs or claims made against you for wrongful acts, breaches of duty, or misleading conduct.
CA ANZ: “D&O insurance is a valuable tool for mitigating personal risk in corporate roles.”
What to Do If You’re Already at Risk
Check for DPNs or outstanding ATO obligations
Review your exposure to personal guarantees
Seek restructuring or insolvency advice immediately if you suspect insolvency
Don’t delay—acting early is your best protection
Final Thoughts
Directorship comes with great responsibility—but also significant personal risk if the business gets into trouble. With careful planning, clear boundaries between personal and business assets, and proactive decision-making, you can reduce your exposure and safeguard your future.
Need help with asset protection or facing financial distress as a director?
Speak to an insolvency professional, commercial lawyer, or restructuring adviser to get tailored advice before it’s too late.
