Steps to close a business

1. Review your decision to close your business

The end goal of your business is to generate profit. If the business is no longer profitable, and is unlikely to be profitable in the future, your best option may be to close your business.

Before you do this, you may want to consider seeking help or advice from a business adviser to see if you can put your business back on track.

2. Take care of your staff

After your business has closed down you may still have obligations to your employees. PAYG, Fringe Benefits Tax, superannuation and Eligible Termination Payment final payments often need to be made even after the doors have closed.

Your employer responsibilities will differ depending on whether a worker is an employee or independent contractor. For detailed instructions on calculating all final payments for employees and independent contractors, use information from the the ATO's When a worker leaves page.

If you're making staff redundant there are support services available to help them retrain and find new work.

3. Communicate the closure

You should:

  • organise meetings with people who will be immediately affected by closing the business including:
    • business partners
    • bank managers
    • guarantors
    • suppliers
  • let your customers know about your closure. You can:
    • post a notice on your shop front
    • post a notice on your business's website
    • personally advise customers
    • advise customers through your business's social media channels
    • send out an email campaign
  • if you're closing a service business, it may be worthwhile speaking to your competitors with the aim of on-selling your client base, or arranging ongoing support for key clients

4. Bankruptcy and liquidation

For businesses in financial difficulty the last step in paying off creditors and dealing with debt is sometimes a declaration of bankruptcy or liquidation of business assets. The main difference between bankruptcy and liquidation is that a bankrupt is usually an individual or sole trader, and liquidation generally applies to a company in receivership.

The Commonwealth Government has recently changed Australia’s insolvency system. The changes introduced new processes from 1 January 2021. These changes aim to reduce complexity, time, and costs for small businesses. They include:

  • businesses can keep trading under control of its owners while a debt restructuring plan is developed
  • a new, simplified liquidation pathway suited for small businesses
  • streamlining of measures for the insolvency sector to meet the demand and needs of small businesses

More details are available on the Budget 2020-21 Factsheet.

If you have been financially impacted by Coronavirus (COVID-19), you may be eligible to receive Commonwealth financial assistance - for more information see the Commonwealth Government’s payments and services during coronavirus (COVID-19) on the Services Australia website.

Applying to become a bankrupt

The process begins by looking at how the individual's assets can be sold and the proceeds distributed to pay debts. If there are not sufficient assets to cover all debts to creditors, a split will be made on a percentage basis. Bankruptcy can be initiated by either a creditor or an individual debtor.

Becoming a bankrupt is not automatic. You or your professional adviser must apply formally to the Australian Financial Security Authority (AFSA), the government body responsible for the administration of bankruptcy and insolvency in Australia. It's a good idea to follow the steps below.

  1. read AFSA's Prescribed Bankruptcy Information guide: you'll need a signed acknowledgement you've done this as part of your application
  2. download AFSA forms to be completed, such as the debtor's petition
  3. if you're a company read the Insolvency Information Sheets from the Australian Securities and Investments Commission (ASIC) website
  4. inform the Australian Tax Office (ATO) when you have ceased trading
  5. seek advice from an accountant or lawyer experienced in bankruptcy and insolvency matters.


Liquidation can happen to a company when its creditors (the main people the company owes money to) pass a vote to have the company liquidated. This follows a period when the company has been put into the hands of an administrator in an attempt to salvage the financial situation of the business. If one of the creditors applies to wind up the company, a liquidator can be appointed to manage the creditors' interests and deregister the company.

The liquidator has a responsibility to all creditors, not just those who applied to wind up the company. The liquidator's basic duties are:

  • collecting and selling the company's assets
  • investigating and reporting to creditors the reasons for company failure
  • determining liquidation costs and the order of payment
  • reporting to appropriate authorities and applying for deregistration of the company

Where there are not enough funds to pay all creditors, payment is usually divided proportionally among them, and in the order described above. Capital is only returned to shareholders if there are surplus funds. In all cases, the costs of the liquidator are met first.

It is the liquidator's job to get as much money as possible from the company, including suing any company directors through a creditor, if it can be shown they were trading when the company was insolvent (unable to pay its debts on time).

Read the insolvency for directors factsheet on the ASIC website.

5. Settle your legal obligations

You will need to:

  • visit the ASIC website to cancel your business name, or to deregister your company
  • make sure you’ve completed all your transactions with the Australian Taxation Office (see: ATO guidance on closing a business) and the Australian Business Register website before you cancel your tax registrations e.g. cancelling your ABN
  • make sure all your personal expenses are recorded separately from your business expenses
  • if you're leasing the premises, know your obligations if you close before the end of your lease. For all leasing questions, ring the Victorian Small Business Commission on 13 22 15
  • go through your list of insurance policies and cancel them if no longer needed
  • make sure you disconnect utility services, cancel local government licences or permits and close business bank accounts
  • seek legal or accounting advice where required

6. Keep business records

Even after your business closes, you must keep your business records, including financial records, customer records and employee records.

Support during and after the closure

Closing a business isn't an easy thing to do. Consider one or more of the following resources:

Mental health and wellbeing

Find out resources and support options to look after your mental health and wellbeing: