When a company has stopped trading, it can be tempting to simply close the bank account, stop lodging paperwork and move on. However, a company remains a separate legal entity until it is formally deregistered. Until then, it continues to have obligations, including ASIC annual review requirements and, where relevant, tax, BAS, payroll and superannuation obligations.

Voluntary deregistration can be a straightforward way to close a small, solvent company with no remaining affairs. It is not suitable for every business, though. The right approach depends on the company’s assets, debts, employees, tax position, shareholder arrangements and any unresolved disputes.

Deregistration is not the same as simply stopping business

A company can stop trading without being closed. For example, it may have no sales, no employees and no active contracts, but still remain registered with ASIC. In that situation, it is still a company in law and its directors must continue to meet the company’s ongoing obligations.

Deregistration is the legal process that removes the company from the register. Once deregistered, the company ceases to exist as a legal entity. It cannot enter contracts, own or transfer property, make payments, bring proceedings or continue operating in its own name.

For many small proprietary companies, voluntary deregistration is appropriate where the business has genuinely finished and all loose ends have been resolved. It is designed for companies with simple affairs, rather than companies that still have significant assets, creditors or disputes.

There are generally three broad pathways to consider:

  • Voluntary deregistration, where the company meets the eligibility requirements and applies directly to ASIC.

  • A solvent winding up, where the company can pay its debts but does not qualify for voluntary deregistration, often because it has more substantial assets or a more complex closure process.

  • An insolvency process, such as voluntary administration or liquidation, where the company cannot pay its debts when they fall due.

Allowing ASIC to deregister a company because annual review fees have not been paid is not a planned closure strategy. It can create avoidable complications, especially if assets, tax matters or creditors have been overlooked.

When a company can apply for voluntary deregistration

A voluntary deregistration application is only available where all of the statutory conditions are satisfied. In practical terms, the company must be fully wound down before the application is made.

The main conditions are:

  • all members, meaning shareholders, agree to the deregistration;

  • the company is not carrying on business;

  • the company’s assets are worth less than $1,000;

  • the company has paid all ASIC fees and penalties;

  • the company has no outstanding liabilities; and

  • the company is not involved in legal proceedings.

These conditions need careful attention. A company may appear inactive but still fail the test because it has money in a bank account, a refundable bond, equipment, shares, intellectual property, a tax refund entitlement, a director loan balance or an unresolved supplier account.

The requirement for no outstanding liabilities is particularly important. Liabilities can include more than ordinary trade creditors. Depending on the company’s circumstances, they may include:

  • unpaid employee wages, leave or other entitlements;

  • superannuation obligations;

  • tax debts or unlodged activity statements;

  • loans from directors, shareholders or related entities;

  • lease obligations, utility accounts or software subscriptions;

  • guarantees and indemnities requiring legal review;

  • disputes with customers, suppliers, employees or regulators.

A company should not apply merely because it expects a liability to be dealt with later. The cleaner approach is to resolve, pay, release or otherwise properly address the obligation before applying.

Preparing the company for closure

The most effective deregistration process begins with a structured closure plan. This reduces the risk of discovering a problem after the application has been lodged, or worse, after the company has been deregistered.

Start by confirming the company’s financial position. Prepare up-to-date accounts and reconcile the bank accounts, loans, payroll records, GST records, receivables and payables. Directors should understand exactly what the company owns and owes before making decisions about distributions or final payments.

A practical pre-deregistration checklist should include the following.

Finalise assets and property

The company must deal with its assets before deregistration. This includes obvious assets such as cash, stock, motor vehicles and equipment, but also less visible items such as:

  • customer deposits and refunds;

  • security bonds;

  • shares or managed fund investments;

  • domain names, trade marks and intellectual property;

  • software licences and subscription credits;

  • insurance policy rights;

  • loans owed to the company;

  • tax refunds or other amounts receivable;

  • land, leases or property-related interests.

Assets should not be left in the company’s name simply because they are small or difficult to transfer. On deregistration, property owned by the company generally vests in ASIC, while property held by the company on trust generally vests in the Commonwealth. Former directors and officeholders cannot simply deal with that property as though it still belongs to them.

This issue is especially important where the company acts as trustee of a discretionary trust, unit trust or self-managed superannuation fund. The company’s own deregistration should not inadvertently leave trust assets registered in the name of a trustee that no longer exists. A replacement trustee and the necessary asset transfers may need to be arranged before the company is deregistered.

Pay debts and close accounts

Settle creditors, employee obligations and related-party balances. Obtain written confirmation where appropriate, particularly for loans or agreements that may otherwise be unclear later.

Close company bank accounts only after all known payments and receipts have been processed. Timing matters. Closing an account too early can make it harder to receive a tax refund or pay a final liability. Leaving an account open after deregistration can also create practical difficulties because the company will no longer exist to operate it.

Review ongoing contracts and registrations as well. This may include leases, merchant facilities, insurance policies, licences, finance arrangements, business names, payroll systems and online service subscriptions.

Resolve tax and superannuation matters

ASIC deregistration does not replace the company’s tax obligations. Before applying, make sure the company’s tax and superannuation affairs are up to date, including overdue and final lodgments, payments and activity statements. The ATO specifically recommends that companies finalise tax and super obligations before voluntary deregistration.

Depending on the company’s circumstances, this may involve:

  • lodging outstanding BAS and company income tax returns;

  • preparing a final BAS;

  • paying or resolving GST, PAYG withholding and PAYG instalment amounts;

  • finalising employee payroll reporting and superannuation obligations;

  • reviewing fringe benefits tax obligations, if applicable;

  • considering the GST treatment of business assets retained, sold or distributed; and

  • cancelling relevant tax registrations at the appropriate time.

If the company is registered for GST and is closing or selling its business, the ATO says its GST registration should generally be cancelled within 21 days. However, timing should be considered alongside outstanding BAS, PAYG and other reporting obligations, rather than treating cancellation as the first step in the closure process.

Tax consequences can also arise where company assets are sold, transferred or distributed to shareholders, or where there are director loan accounts and unpaid present entitlements. These matters should be reviewed before money or property changes hands. A deregistration application should not be used as a substitute for properly documenting and implementing the company’s final transactions.

Keep the right records

Closing a company does not mean its records can be discarded. Directors who held office immediately before deregistration must generally retain the company’s books for three years after deregistration. Tax record-keeping obligations may require records to be kept for longer in particular circumstances.

Keep organised copies of:

  • financial statements and reconciliations;

  • bank statements;

  • tax returns and BAS;

  • payroll and superannuation records;

  • shareholder and director resolutions;

  • asset sale or transfer documents;

  • loan agreements and balance confirmations;

  • proof that liabilities were paid or otherwise resolved; and

  • ASIC correspondence and the deregistration application.

Applying to ASIC and understanding the timing

Once the company satisfies the eligibility requirements, an application for voluntary deregistration can be lodged using Form 6010. The application may be made by the company, a director, a member or a liquidator.

ASIC charges an application fee, which is separate from any outstanding annual review fee, late fee or penalty. Fees can change, so it is sensible to confirm the current amount before lodging rather than relying on older guidance.

After ASIC accepts the application, it gives notice of the proposed deregistration and publishes a notice. ASIC may deregister the company once two months have passed after publication of that notice.

This notice period is important. It gives creditors and other interested parties an opportunity to raise concerns or take steps where appropriate. It also means deregistration is not immediate, even where the company’s affairs are straightforward.

If an annual review fee is approaching, timing the application may matter. ASIC recommends applying at least two weeks before the review fee due date if the aim is to avoid paying the next annual review fee. However, a rushed application is rarely worthwhile if the company’s tax, assets or liabilities have not been properly finalised.

What if the company does not qualify?

A company that does not meet the voluntary deregistration conditions should not try to force the process. For example, a company may be solvent but have assets worth more than $1,000, an unresolved loan account, a pending tax matter or a dispute with a customer.

Where a company is solvent but its affairs are more complex, a members’ voluntary winding up may be the appropriate pathway. This involves appointing a liquidator to manage the winding-up process, realise assets, settle claims and distribute any surplus in accordance with the law.

Where the company cannot pay its debts when they are due, directors should obtain accounting and legal advice promptly. Insolvency raises separate duties and risks. Voluntary deregistration is not available simply because a company has stopped trading or cannot meet its debts.

ASIC can also initiate deregistration in certain circumstances, including where a company’s annual review fee has remained unpaid for at least 12 months after the due date. ASIC gives notice of its proposed action, but directors should not view this as a convenient alternative to an orderly closure.

An ASIC-initiated deregistration may leave unresolved assets, debts, records and tax matters behind. It may also be necessary to reinstate the company later if a forgotten asset, legal claim or administrative requirement emerges.

A simple example of a planned company closure

Consider a small consulting company that stopped taking on work several months ago. It has one director-shareholder, no employees and no external debt. The director initially believes voluntary deregistration will be simple.

During the closure review, however, the accountant identifies a small bank balance, an outstanding customer invoice, a company tax return still to be lodged, a GST registration and a loan account between the director and the company. The company cannot yet truthfully say that it has no assets or liabilities.

The business first collects the invoice, finalises its accounts, lodges outstanding tax documents, resolves the loan balance, deals with the remaining cash appropriately and cancels registrations at the right time. Once the company has no outstanding liabilities, no material assets, no legal proceedings and shareholder agreement, it is in a much stronger position to apply for voluntary deregistration.

The lesson is simple: the application itself is usually not the hard part. The work lies in completing the financial, tax and legal housekeeping beforehand.

Deregistration, reinstatement and the importance of getting it right

Deregistration should be treated as a final step, not an administrative shortcut. Once a company is deregistered, it ceases to exist and company property may vest in ASIC or the Commonwealth. If an overlooked asset or legal issue later emerges, reinstatement may be required.

ASIC may reinstate a company where it should not have been deregistered. A court may also order reinstatement where an aggrieved person or former liquidator applies and the court considers reinstatement just. If reinstated, the company is generally treated as having continued in existence as though it had not been deregistered.

That outcome can be useful, but it is usually far better to avoid the cost, delay and uncertainty of reinstatement by carrying out a careful closure process in the first place.

A well-managed company deregistration involves more than lodging a form. It requires directors to confirm that the company’s assets, liabilities, tax obligations, employee matters and records have all been properly addressed. If you are considering closing a company, can help you work through the financial and tax steps in a way that suits your circumstances.

This article is general information only and is not personal financial, legal or tax advice. Before deregistering a company, speak with a registered tax agent or accountant, such as, about your specific circumstances.