iscoverI've been liquidating businesses for over 35 years now, and lately I'm seeing something that troubles me: accountants creating liability for themselves while genuinely trying to help their clients.
The accountant who thought they were helping (and created a $200k liability instead)
13 November 2025
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13 minute read
Last month, a director called me in a panic. She'd bought a business, agreed to pay off the seller's tax debt as part of the purchase price, and now found herself personally liable for director penalties she didn't even know existed. The former directors were demanding she pay down their personal tax liability on top of the payment plan she was already struggling to meet.
The worst part? Her accountant had arranged the entire transaction, assured everyone that the payment arrangement meant the director penalty notices were "redundant," and used a Queensland contract template for an NSW sale.
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That accountant is now facing potential liability that could dwarf their annual fees from this client.
And they're not alone. In the past six months, I've seen two matters settle where accountants paid directors a portion of their director penalty notice liability. The Victorian Supreme Court recently handed down a decision that should worry every accountant who acts as a registered office for clients.
The common thread? Accountants stepping outside their expertise while trying to be helpful.
The "just being helpful" trap
Let me walk you through how good intentions turn into liability exposure.
The business sale case started innocently enough. An existing client wanted to sell their business. The buyer didn't have an adviser and needed help. The accountant thought, "I'll just help get this deal across the line. Keep the relationship going."
What followed was a masterclass in how to create multiple liability exposures:
Acting for both parties: The accountant advised both buyer and seller in the transaction. I understand how this happens – you want to keep the client, the buyer needs help, you're just trying to facilitate a simple deal. But now you have conflicting duties and no way to serve both parties' interests.
Playing lawyer: The accountant drafted the sale agreement using a standard Queensland Business Sale Agreement template – for a NSW transaction. Different States have different requirements. Legal work requires legal expertise and professional indemnity insurance that covers it.
Misunderstanding director penalties: This is where it gets expensive. The accountant advised both parties that the payment arrangement with the ATO made the director penalty notice "redundant."
Wrong.
A payment arrangement under a director penalty notice doesn't avoid personal liability. That arrangement was actually a personal agreement between the former directors and the ATO. When the former directors checked their personal tax portal, they discovered their liability had increased to include the director penalty amounts.
Valuation Issues: The business was valued at the quantum of the tax debt. No independent valuation. No assessment of actual business value. Just: "The business is worth whatever the tax debt is."
Now both sets of directors are at panic stations, the new director can't afford the dual payments, and everyone's looking at the accountant, asking: "How did you let this happen?"
The Victorian Supreme Court warning
If you're acting as a registered office for clients, you need to know about West Homes Australia Pty Limited [2023] VSC 732.
An accountant's office was the registered office for a client. A statutory demand arrived. The accountant forwarded it to the client by post only.
The client knew nothing about it until the winding-up application.
The Court's view? Brutal and clear:
"In deciding to forward the statutory demand to the client company by post only, the accountant had not acted reasonably. An accountant would know well that a statutory demand involves strict time frames…it is simply not credible to suggest that an accountant would not have used some other means, perhaps in addition to post, to alert the director."
The Court refused leave to oppose the winding-up. The client had to save their company the hard, costly way.
Translation: if you're going to act as the registered office, you're expected to understand the implications of the documents you receive and act accordingly.
The automation blind spot
I see this constantly: automated ASIC annual lodgement notices sent to clients through practice management software.
Efficient? Yes. Safe? Not necessarily.
These documents set the address where the ATO sends director penalty notices. If that address is wrong, your client won't receive critical notices that could result in personal liability.
I've received these automated notices for companies I'm administering – companies already in liquidation. The automation doesn't know the company is dead. It just keeps sending notices.
What should trouble you: if the address on these automated forms is incorrect, and your client misses a director penalty notice as a result, who bears that risk?
The 84,000 notices you can't ignore
The ATO issued 84,000 director penalty notices last financial year. That's not a typo. 84,000.
Yet I still hear accountants tell clients: "Don't worry about it, we've got a payment arrangement in place."
This advice is dangerous for two reasons:
First, as the business sale case demonstrates, payment arrangements don't eliminate director penalty liability. They're personal agreements between directors and the ATO.
Second, some director penalty liabilities are "locked in" because the company failed to lodge returns on time. No amount of payment arranging fixes that – the director remains personally liable.
In line with the Victorian Supreme Court judgment, it's arguable that simply recommending clients ignore these notices – even with payment arrangements in place – would be considered unreasonable.
The CFO risk multiplier
As more accountants move into outsourced CFO functions and take on routine BAS work, the exposure multiplies.
You're no longer just preparing historical financial statements and lodging returns. You're actively managing the financial operations that trigger these obligations.
If you're handling BAS lodgements and payments, you're in the firing line when things go wrong. The more you take on operational responsibilities, the more you need to understand the implications of missed deadlines and unpaid obligations.
What strategic protection actually looks like
Stop thinking of risk management as just having professional indemnity insurance. Start thinking about it as knowing where your expertise ends.
Know your boundaries: If a transaction requires legal documentation, refer to a lawyer. "Just using a standard template" isn't protection – it's evidence you were providing legal services without legal qualifications.
Avoid dual representation: No matter how simple the transaction looks, representing both buyer and seller creates conflicts you can't manage. Pick a client or step back entirely.
Understand director penalties: You don't need to be an insolvency expert, but you need to understand that:
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Payment arrangements don't eliminate personal liability
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Some liabilities are "locked in" and can't be negotiated away
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Missing notices creates personal exposure for directors
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You're expected to know this and act accordingly
Verify before automating: Those automated ASIC notices? They need human oversight. Verify addresses are current. Make sure clients confirm the information. Don't let efficiency create liability.
Document everything: If you receive statutory demands, director penalty notices, or other time-critical documents on behalf of clients, document how and when you forwarded them. Don't rely on "I'm sure I sent it."
The uncomfortable question
Look at your current practice. How many of these apply to you:
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You act as the registered office for clients and forward documents by email only
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You've helped facilitate business sales between clients
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You've told clients not to worry about director penalty notices because "we have a payment arrangement"
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You send automated ASIC notices without verifying that the information is current
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You're taking on more operational responsibilities (BAS, payroll, cash flow management) without reviewing your risk exposure
If any of these sound familiar, you're carrying more risk than you think.
The real cost
The accountant in the business sale case probably charged a few thousand dollars for their "help". They're now facing potential liability that could be ten times that amount, plus reputational damage, plus the cost of defending themselves.
The accountants who recently settled director penalty matters? They paid out portions of liabilities to avoid worse outcomes.
The accountant in the Victorian Supreme Court case? They watched their client face a winding-up application that could have been avoided with one phone call.
These aren't theoretical risks. They're actual cases from the past twelve months.
The challenge
This isn't about not helping clients. It's about helping them in ways that don't expose you to liability you're not equipped to handle.
You don't need to become an insolvency expert or stop acting as the registered office. You just need to understand the implications of the roles you're taking on and act accordingly.
The Victorian Supreme Court set a standard: an accountant "would know well" the implications of statutory demands and would act reasonably to ensure clients are properly informed.
That same standard applies to director penalty notices, business sale agreements, and every other situation where you're stepping beyond routine compliance work.
The question isn't whether you're trying to help your clients. The question is whether you're helping them in ways that create more problems than you solve.
Because when things go wrong, "I was just trying to help" isn't a defence – it's evidence you were operating outside your expertise.
Eddie Senatore is a fellow of CA ANZ with over 30 years of experience in business recovery and insolvency. He is also a trained mediator specialising in shareholder disputes. His research on proactive advisory approaches can be found in his recent white paper on preventing financial distress through strategic early intervention.
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