Deed of company arrangement and the ATO: will the Tax Office vote for your DOCA?

The administrator has done the numbers, and the word “DOCA” has come up. Your company owes trade creditors, a bit to the bank, and a lot to the ATO. Most of the debt by dollar value is tax. So the question that really matters isn’t what a deed of company arrangement is. It’s whether the Tax Office will vote for it, and what you’ll still owe personally if it does.

Short version: when the ATO holds most of the debt, it usually decides whether a DOCA passes, because a resolution needs a majority of creditors by both number and value. The ATO weighs what the deed returns to revenue against liquidation, whether the promises are realistic, and how the company has treated its tax obligations. And even a successful deed leaves lockdown director penalties and personal guarantees where they were.

We’re a funder, not an insolvency firm, so we don’t sell administrations. We do see a lot of directors come out the other side of one, and the same few misunderstandings come up every time.

What is a deed of company arrangement, in one paragraph?

A DOCA is a binding agreement between a company in voluntary administration and its creditors. ASIC describes it as a “binding arrangement between a company and its creditors” that sets out how the company’s affairs will be dealt with. Typically a director or a third party proposes it, offering a lump sum, payments over time, or a mix, in exchange for creditors accepting less than the full debt. If creditors vote for it, the company signs the deed, a deed administrator runs it, and once it’s fully carried out the company’s old unsecured debts covered by the deed are released.

If you’re still weighing up administration against the alternatives, start with our comparison of voluntary administration vs liquidation. This guide picks up at the point where a DOCA is on the table and the ATO is the creditor that counts.

How the DOCA vote works when the ATO is the biggest creditor

The administrator must hold the second creditors’ meeting within 25 business days of being appointed, or 30 business days if the period runs over Christmas or Easter. That second figure matters right now: an appointment in late November will run into the holiday period.

At that meeting, creditors choose between three outcomes: accept the DOCA, hand the company back to the directors, or put it into liquidation. According to ASIC’s guide for creditors, a resolution on a poll needs a majority in number and value. More than half of the creditors voting must say yes, and together they must be owed more than half of the debt being voted.

Here’s how that plays out with the ATO in the room:

Scenario	Number majority	Value majority	Result
ATO owed 70% of debts, votes yes, most trade creditors vote yes	Yes	Yes	DOCA passes
ATO owed 70%, votes no, most trade creditors vote yes	Yes	No	Deadlock: administrator may use a casting vote
ATO owed 70%, votes no, most trade creditors vote no	No	No	DOCA fails

The middle row is where things get contested. The chair, usually the administrator, can use a casting vote to break the deadlock and must give reasons. Any creditor can ask the court to review that decision. In Commissioner of State Revenue v McCabe (No 2) [2024] FCA 662, a state revenue office lost its challenge to a DOCA passed on the administrators’ casting vote. The court was influenced by the fact that the companies were trading profitably and keeping staff, and that no creditor was shown to be worse off than in a winding up.

The lesson isn’t that you can ignore the ATO. It’s that a casting vote is a fallback that invites a fight. A deed the ATO actually supports is far safer.

What the ATO weighs before it votes

Chapter 20 of the ATO’s Receivables Policy sets out how the Commissioner decides. The headline factor is “the tangible benefit to the Commonwealth revenue” expected from the proposal. In plain terms, that means: does this deed pay the ATO more, sooner, than a liquidation would? Beyond that, the policy looks at:

• How likely the deed’s promises are to be met. A contribution sitting in a solicitor’s trust account is worth more than instalments that depend on a turnaround.
• The quality of the administrator’s report. Thin investigations or rosy forecasts count against a proposal.
• Adverse features. The ATO generally supports deeds that don’t carry them. Clauses that release directors or related parties from claims, or that cut off a liquidator’s ability to chase voidable transactions, are the classic examples.
• Compliance history and the future. Insolvency commentators consistently report that the ATO looks at the company’s lodgement record and whether it engaged with the ATO before the appointment. A company that stopped lodging BAS a year ago is asking the ATO to back a business that may simply build up new debt.

The practical takeaway: before the second meeting, get every outstanding lodgement in. A deed proposal from a company that’s up to date with its BAS reads very differently to one from a company that’s been invisible for three quarters.

Thinking about putting money into a deed, or would you rather clear the ATO and avoid administration altogether? Check your options. It takes about a minute and won’t touch your credit file.

Where does the money for a DOCA come from?

This is the question that sinks most proposals. ASIC’s review of voluntary administrations from July 2021 to June 2025 (REP 836, released in 2026) found:

• 44% of companies in administration went on to a DOCA. About half of second meetings had a DOCA proposal, and 87% of those were accepted.
• 63% of approved DOCAs involved third-party funding.
• Smaller companies struggle most. Fewer than a third of appointments with liabilities under $1 million approved a deed, compared with 48% of those over $10 million.
• For wholly effectuated deeds, the median dividend to unsecured creditors was 11.5 cents in the dollar, and the average was 21 cents.
• Of finalised deeds, 81% were wholly effectuated and 17% ended in creditors’ voluntary liquidation.

In other words, the deeds that pass usually have fresh money behind them, often from a director, family member, related company or buyer. Common sources are:

1. Director or family property equity. A second mortgage over a home or investment property, taken out by the director personally, to fund a lump-sum contribution.
2. A related entity. A holding company or trust that owns property or other assets borrows and contributes.
3. Sale of non-core assets. A spare vehicle, a second site or surplus stock sold to fund the contribution.
4. Future trading. Instalments from profits over 12 to 36 months. This is the weakest on its own, because it depends on the business performing while carrying its new tax obligations.

A lump sum on day one beats instalments in the ATO’s eyes, because certainty is part of the return it’s weighing.

What a DOCA doesn’t fix

This is the part that surprises directors most. A DOCA binds the company and its unsecured creditors. It doesn’t change your personal position in three important ways.

Lockdown director penalties stay. Appointing an administrator within 21 days of a standard director penalty notice remits that penalty. But a lockdown director penalty, which covers PAYG withholding or GST reported more than three months late or never reported, can only be remitted by paying the company’s liability. A deed that releases the company for a fraction of the debt isn’t payment in full, so the ATO can still pursue you for the locked-down balance. If you’ve received a DPN, run the date through our DPN deadline calculator before anything else.

Personal guarantees stay. ASIC is explicit that a creditor holding a guarantee from a director can still enforce it. Your landlord, equipment financier or main supplier can come to you.

Secured creditors aren’t bound unless they vote yes. The bank with a security interest over the business assets can still enforce, unless it voted for the deed or the court orders otherwise.

There’s also a quieter risk. A DOCA is only as good as its completion. If it fails and the company goes into liquidation, the liquidator can investigate payments made before the administration, and the director’s contribution may already be spent.

DOCA vs paying the ATO in full: the honest comparison

	DOCA	Clearing the ATO debt with funding
Who controls the business	Administrator during the VA, then deed administrator	You, throughout
Practitioner fees	Yes, paid from assets or the deed fund	None
Lockdown DPNs	Stay with the director	Removed once the company liability is paid
Personal guarantees	Stay	Stay in place, but nothing triggers a call on them
Effect on other creditors	They take a cut	Paid in full as normal
Public record	Appointment notices published on ASIC’s register	No public notice

If a DOCA would need you to put up a property-funded contribution anyway, it’s worth asking a blunt question: could that same equity clear the ATO debt in full, or close to it? If the gap is small, refinancing the tax debt keeps control, avoids fees and removes lockdown exposure. Our guide to whether you should restructure or refinance works through that decision. Where the debt is far bigger than any equity you could raise, a deed may well be the better tool, and that’s fine.

A worked example: the joinery company

This is an illustrative scenario, not a real client.

A joinery manufacturer in western Sydney owes about $1.1m in total. Roughly $780k is ATO debt (BAS, PAYG withholding and super guarantee charge), about $240k is trade suppliers and the rest is equipment finance. The director owns a home with significant equity. Two quarters of BAS were lodged more than three months late.

The administrator estimates a liquidation would return about 4 cents in the dollar to unsecured creditors. The director proposes a deed with a $250k lump sum, funded by a personal second mortgage, plus $5k a month for 18 months from trading. Before the meeting, the accountant brings every lodgement up to date.

The ATO votes yes. The deed beats liquidation comfortably, most of the money is certain on day one, and the company is now compliant. But the late-lodged BAS quarters mean part of the PAYG withholding and GST is locked down. The director still owes that personally, so the director goes back to the lender and extends the facility to clear the locked-down amount. That should have been costed into the plan from the start.

The deed worked. The director’s real total cost was the contribution, the practitioner fees, and the lockdown amount. Comparing that total with a straight refinance of the ATO debt is the exercise worth doing before you appoint anyone. Our questions to ask any tax debt adviser checklist helps you get those numbers on the table.

Funding a deed, or avoiding one: find out where you stand

We talk to directors facing these decisions often, and we don’t flinch at an ATO balance with a DPN attached. Sometimes the right answer is a property-secured loan that clears the ATO before anyone is appointed. Sometimes it’s a director’s loan that funds a stronger DOCA contribution, so the ATO has every reason to vote yes. Either way, it helps to know what’s possible before the second meeting date is set.

Where the numbers work, property-secured funding runs from $20,000 to $5,000,000, and can be possible in as little as 24 hours. Where it’s arranged at settlement, the funds can be paid straight to the ATO.

The enquiry takes about 60 seconds, and asking doesn’t involve a credit check, so your credit file stays exactly as it is. Your file isn’t shopped around a crowd of lenders, so you won’t be chased by people you’ve never contacted. A real person who understands ATO debt and insolvency timelines reads what you send and calls you.

Please fill the form in accurately: the total ATO debt, how much is PAYG withholding and GST, whether you’ve received a DPN and when, whether an administrator has been appointed or approached, and what property you or a related entity owns. Those details let us tell you on the first call whether funding clears the debt, strengthens a deed, or isn’t the right fit.

Find out where you stand →