Bankruptcy Restrictions in Australia: What You Can and Cannot Do
Bankruptcy restrictions in Australia allow most people to keep working, earn income, operate as a sole trader, and travel within Australia. An undischarged bankrupt must obtain the trustee’s written consent before overseas travel, disclose bankruptcy for specified transactions at or above the indexed credit threshold, and refrain from managing corporations unless the court grants leave. They must also report relevant financial changes and cooperate with the trustee. Bankruptcy usually lasts three years and one day, but a valid objection can extend it. Discharge ends many restrictions; it does not automatically return vested assets or erase unpaid income contributions.
Understanding bankruptcy restrictions in Australia
The question “Can I do this while bankrupt?” often conceals several different legal issues. A person may be entitled to keep working but unable to retain all the income they earn. They may be permitted to trade in their own name but required to disclose bankruptcy when taking a customer’s deposit. They may keep their passport for an approved trip without having unrestricted permission to leave Australia again.
Most bankruptcy restrictions in Australia discussed here concern an undischarged bankrupt: someone whose bankruptcy has begun and has not ended. Receiving a bankruptcy notice does not, by itself, make a person bankrupt. Stonegate Legal’s guide to what a bankruptcy notice means explains the earlier enforcement process. Confusing the two stages can lead to a debtor overlooking the notice while worrying about restrictions that have not yet commenced.
The main legislation is the Bankruptcy Act 1966 (Cth) and, for company management, the Corporations Act 2001 (Cth). Personal bankruptcy is a federal regime. The core rules therefore apply in Queensland as they do elsewhere in Australia, although occupational licensing and other State laws can add requirements.
Bankruptcy restrictions at a glance
The table distinguishes permission, disclosure and financial consequences. These are not interchangeable: telling a trustee about a trip is not consent, and telling a lender about bankruptcy is not an entitlement to a loan.
| Activity | General position during bankruptcy | What must be checked |
| Working as an employee | Generally permitted | Occupational rules, income reporting and assessed contributions |
| Operating as a sole trader | Generally permitted | Business-name disclosure, assets, records and commercial transactions |
| Managing a corporation | Prohibited while disqualified unless court leave permits it | The actual decisions made, not merely the job title |
| Travelling within Australia | No trustee consent required under the overseas-travel provision | Attendance obligations and notification of relevant changes |
| Leaving Australia | Written trustee consent required | Approved destinations, dates and conditions; preparatory acts also matter |
| Borrowing or obtaining specified goods and services | Not subject to a blanket borrowing ban | Disclosure at or above the indexed threshold and the lender’s decision |
| Selling an asset | Depends on ownership and whether it has vested in the trustee | Protected property, security interests and trustee authority |
The statutory detail appears below. A “generally permitted” activity can still trigger another obligation. For example, overseas employment may be lawful work but require travel consent and affect the income assessment.
Bankruptcy restrictions on overseas travel
Written consent must come before the trip
Section 272(1)(c) makes it an offence for an undischarged bankrupt to leave Australia, or do an act preparatory to leaving, without the trustee’s written consent. The maximum imprisonment for this offence is three years. Unlike the pre-bankruptcy conduct addressed elsewhere in the section, paragraph (c) does not require an intention to defeat or delay creditors.
The preparatory-act wording deserves attention. AFSA’s guidance on requesting travel consent expressly identifies purchasing flights as an example. Advice to “get permission before departure” is therefore incomplete. Obtain written consent before committing to travel arrangements that may fall within the provision.
A passport also does not settle the issue. Under s 77(1)(a)(ii), a bankrupt must give the trustee any passport or travel document held, unless excused by the trustee or prevented by illness or other sufficient cause. Having a valid passport, or being able to book a flight, does not remove the consent requirement.
Bankruptcy restrictions in Australia do not require trustee consent for ordinary interstate travel under s 272. A Queensland resident can travel to Sydney without applying under that provision. They must still meet attendance and cooperation obligations; moving interstate may also require updating their details.
What the trustee considers
For bankruptcies administered by the Official Trustee, AFSA identifies matters such as outstanding information, whether administration requires the person’s presence in Australia, unpaid income contributions and the risk of non-return. A well-supported request should explain the destination, dates, purpose and funding, and how any outstanding obligations will be met.
Section 272(2) allows written conditions, including conditions about income contributions where the bankrupt is liable to contribute. Contravening a condition is a separate offence under s 272(3), carrying a maximum of one year’s imprisonment. An approval for one destination and period should not be treated as permission to extend a holiday or add another country.
Employment and compassionate circumstances can support an application. They do not dispense with consent. If a return date changes, seek a written variation rather than relying on an informal conversation.
Case example: Albert and the limits of travel conditions
In Albert, in the matter of Albert (Bankrupt) v Lock (Trustee) [2016] FCA 1547, the bankrupt wanted to travel to Bali for his wife’s birthday. The trustees required payment of newly assessed income contributions totaling $96,063.50 within seven days as a condition of consent.
Yates J identified a problem with the payment determination: it did not respect the statutory minimum notice period. The Court also accepted that the trip was genuine, the risk of non-return was slight, and the short absence would not hamper administration. It ordered written consent without the contribution-payment condition, subject to an undertaking about the trip and return of the passport: see [3]–[10] and [49]–[59].
The case shows that Australia administers bankruptcy travel restrictions for proper purposes and that conditions can be challenged. It does not establish a general right to travel while contributions remain unpaid. The evidence and the particular condition mattered.
Albert used an earlier statutory review provision. A present application must use the current statutory framework, including the Court’s estate-administration powers under s 90-15 of Schedule 2 and the application provisions in s 90-20. A solicitor should identify the available jurisdiction and standing before commencing proceedings, rather than copying the historical application.
Real-world example a family-funded overseas visit
Suppose an undischarged bankrupt in Brisbane wants to visit a sick parent in New Zealand. A sibling offers to pay the airfare and accommodation. Those facts explain the purpose and funding, but they do not eliminate the consent requirement. The bankrupt should apply before purchasing the flight, provide the proposed itinerary, and obtain written approval covering the dates.
The point of this hypothetical is timing. A compelling reason and a generous relative cannot retrospectively turn an unauthorised booking into written trustee consent.
Bankruptcy restrictions on employment and income
No general rule prevents bankruptcy from affecting employment or capping earnings. AFSA’s income and employment guidance confirms that people can usually continue working. Separate rules may affect a regulated occupation, a licence or particular duties. A person should check their own regulator’s requirements rather than assume that every professional body takes the same approach.
Stonegate Legal’s guide to bankruptcy and employment examines those occupational issues. They should be considered separately from the income-contribution assessment: keeping a job does not establish that all earnings can be retained.
Under s 139P, assessed income above the applicable threshold can create a contribution liability. Section 139S supplies the calculation, broadly one-half of assessed income above the actual income threshold. This uses statutory assessed income and the applicable threshold, rather than simply halving gross salary. The number of qualifying dependants affects the threshold; check the current indexed amounts published by AFSA.
Income reporting is part of bankruptcy restrictions even where no contribution is presently payable. Section 139U requires relevant information and notification of specified changes. Do not wait until the trustee asks about a pay rise, new self-employment income, or a change in expected income.
A contribution assessment can also be disputed through the statutory review process. For hardship, s 139T allows an application for a higher threshold on specified grounds, supported by evidence. An objection to the amount is not permission simply to stop paying.
Bankruptcy restrictions on running a business
Sole traders can continue, but the structure matters
A sole trader is not automatically prohibited from trading. However, bankruptcy restrictions in Australia can affect assets used in the business, supplier terms, customer payments and the name under which the business operates. Stonegate Legal’s guide to running a business while bankrupt deals with these issues in more detail.
Section 269(1)(b) requires a person trading under an assumed name, another person’s name or a firm name to disclose their true name and bankruptcy to every person with whom they, or the relevant partnership, deal. AFSA explains this as requiring disclosure where the business name does not contain the bankrupt’s full name. This obligation is separate from the monetary threshold for credit transactions.
The ability to trade also says nothing about ownership of equipment or stock. Section 58(1) provides that property vests in the trustee, subject to the Act. Section 116(2) includes exclusions, including qualifying household property, tools, and transport property, subject to the relevant limits and conditions. A sole trader should establish which business assets remain available before promising customers that work can proceed.
Records are essential. Section 277A(1) and s 277A(2) require books recording and explaining income, employment and financial or business affairs during bankruptcy, in an accessible form, with retention until discharge unless the statutory release applies. Bank feeds alone may not explain what a payment was for. Keep invoices, contracts, receipts and the documents supporting the information given to the trustee.
Company management is a different question
Section 206B(3) of the Corporations Act automatically disqualifies an undischarged bankrupt from managing corporations. Under s 206A(2), disqualification also causes cessation as a director, alternate director or secretary unless the relevant permission is given.
The prohibition concerns conduct as well as office. Section 206A(1) addresses decisions affecting the whole or a substantial part of a corporation’s business, significant influence over its financial standing, and specified instructions or wishes communicated to directors. An employee can therefore cross the line into prohibited management even without appearing on ASIC’s register as a director.
For example, appointing a spouse as director while the bankrupt continues to decide which major creditors are paid and direct the company’s overall operations may engage the prohibition. Calling the bankrupt a consultant does not answer the statutory question. The instructions, decisions and actual authority must be examined.
Court leave is available under s 206G(1), subject to the statutory requirements. Subsection (2) requires notice to ASIC at least 21 days before proceedings commence, and subsection (3) permits conditions. Leave should be obtained before resuming management. Neither a trustee’s agreement nor a company’s consent substitutes for the Court’s permission to manage while automatically disqualified by bankruptcy.
Bankruptcy restrictions on credit and customer payments
The indexed amount is a disclosure threshold
Bankruptcy restrictions do not impose a general borrowing limit. They require disclosure in specified transactions, while the lender remains free to refuse credit.
As checked on 5 October 2026, AFSA’s indexed amounts table states a threshold of $7,457 for the relevant s 269 transactions. Although the printed legislation contains a base figure of $3,000, s 269(2) makes the provision subject to indexation under s 304A. The indexed amount changes quarterly.
Section 269(1)(a) applies when obtaining credit at or above the threshold without informing the other person of bankruptcy. “Above $7,457” is an inaccurate shortcut because the statutory wording includes equality. Disclosure should occur before the transaction, and a written record is sensible evidence of what was communicated.
The section reaches beyond loans. Paragraph (aa), paragraph (ab), paragraph (ac) and paragraph (ad) cover specified payment instruments, hire-purchase and goods-hire arrangements, promises to pay for goods or services, and money obtained on a promise to supply goods or services. Several paragraphs expressly aggregate amounts. Breaking a commercial arrangement into installments does not necessarily avoid disclosure.
Section 269 carries a maximum of three years’ imprisonment. Therefore, check disclosure obligations when an arrangement is proposed, not after a supplier complains.
Real-world example: a deposit rather than a loan
Assume a bankrupt landscaper accepts $8,000 in advance to supply materials and perform work. This is not ordinary bank borrowing, but s 269(1)(ad) addresses obtaining money by promising to supply goods or services. Bankruptcy must be disclosed before obtaining money in an arrangement caught by that paragraph.
If the landscaper also trades under an assumed business name, the separate business-name rule applies even to smaller dealings. These overlapping bankruptcy restrictions in Australia explain why advice limited to “do not borrow more than the credit limit” is unreliable.
Bankruptcy restrictions on dealing with assets
A bankrupt should not sell, give away or use property on the assumption that possession means ownership. Sections 58 and 116 determine what vests and what is divisible among creditors, subject to the statutory exclusions. Divisible property acquired before discharge must also be disclosed under s 77(1)(f).
Earlier transfers can be challenged too. Section 120 concerns undervalued transfers within the applicable statutory periods. Section 121(1) addresses transfers meeting its property and creditor-defeating-purpose requirements. Transferring property to a spouse does not automatically protect it; equally, a family transfer is not automatically recoverable merely because the recipient is related. The provision relied upon, evidence and available protections must be analysed.
Stonegate Legal’s guide to voidable transactions in bankruptcy explains the recovery provisions. These asset rules are financial consequences that sit alongside bankruptcy restrictions on personal conduct.
Case example: Cummins and a transfer of the family home
In The Trustees of the Property of John Daniel Cummins, A Bankrupt v Cummins [2006] HCA 6, a barrister transferred his interest in the matrimonial home to his wife in 1987 and later became bankrupt in 2000. The stated price was not paid. He had also failed to lodge tax returns for decades.
The High Court allowed the trustees’ appeal and restored the declarations that the challenged transfers were void against them under s 121. The reasons examine how the documentary evidence supported an inference about the transferor’s main purpose: see [16]–[17], [25]–[27], [34]–[35], [43]–[54] and the orders.
The practical lesson is evidentiary. A description such as “family arrangement” does not determine recoverability. A solicitor needs the transfer documents, payment records, financial position and contemporaneous explanation. The decision does not make every transfer of a matrimonial home void.
Cooperation is part of bankruptcy restrictions
Section 77(1) requires attendance when reasonably required, provision of information, notification of material changes, execution of required instruments and assistance in administering the estate. Cooperation is an ongoing duty. Completing a statement of affairs does not end it.
If you cannot answer a request accurately by the deadline, identify the difficulty and seek an extension while gathering the records. Do not substitute a confident guess for a missing bank statement or an uncertain ownership history. Where a request raises disputed ownership, a suspected offence or a compulsory examination, obtain advice about the response and any applicable privilege without abandoning current obligations.
Bankruptcy restrictions in Australia can have several consequences at once. A trustee may pursue property or unpaid contributions; particular conduct may support an objection to discharge; and a defined offence may be prosecuted. Each route has its own legal requirements. A trustee’s allegation is not, by itself, a criminal conviction or a valid extension of bankruptcy.
Stonegate Legal’s guide to bankruptcy restrictions and breach consequences addresses the detailed duties, offence provisions and enforcement issues.
How long do bankruptcy restrictions last
The discharge date depends on how bankruptcy began
Section 149(1) provides for automatic discharge at the end of three years from the applicable statutory date, subject to an effective objection. AFSA commonly describes the ordinary practical duration as three years and one day.
For an ordinary voluntary bankruptcy, s 149(1)(b) uses the date the Official Receiver accepted the debtor’s petition. For a sequestration order, s 149(1)(a) uses the filing date of the statement of affairs accepted under the Act. Delaying that statement can therefore delay discharge. Special partnership and transitional provisions can affect particular bankruptcies.
An objection can extend the restrictions
A trustee can file an objection before discharge under s 149B, but must rely on a ground in s 149D(1). The grounds include specified failures concerning information, income, contributions, property, attendance and overseas absence. Contravening the company-management prohibition after bankruptcy is also a ground under s 149D(1)(b).
Section 149A(2) substitutes a five- or eight-year period, depending on the ground. It is not a uniform additional penalty. For the overseas-absence grounds identified in s 149A(2)(b)(i), the prescribed date is the date of return to Australia. A person should therefore never assume that waiting out three years overseas ends the bankruptcy restrictions in Australia.
Under s 149K(3), a bankrupt’s request for Inspector-General review must be in writing within 60 days after notification of the objection and include the required documents. An objection notice warrants prompt analysis of its ground, evidence and review options.
Annulment can end a bankruptcy through a different route. It is not simply early discharge. Stonegate Legal’s guide to annulling a bankruptcy explains the available mechanisms, including payment in full and court annulment.
Which bankruptcy restrictions end on discharge
Discharge changes the person’s status. It does not necessarily complete the trustee’s work. The distinction matters particularly where a home remains unsold or contributions are outstanding.
| Issue | Position after discharge | Source or qualification |
| Trustee consent for overseas travel | No longer required merely because of the former bankruptcy | Section 272(1)(c) concerns an undischarged bankrupt |
| Bankruptcy-based company disqualification | Ends when the person is no longer an undischarged bankrupt | Section 206B(3); other disqualifications can remain |
| Disclosure for financial transactions | No longer applies merely because of the former bankruptcy | Section 269(1); the section also separately covers debt agreements |
| Property already vested in the trustee | Does not automatically return to the former bankrupt | Sections 58 and 152; administration can continue |
| Existing assessed income contributions | Discharge does not extinguish the liability | Section 139R |
| Assistance with vested property | Reasonable assistance remains required | Section 152 |
| Credit report | Bankruptcy remains for five years from bankruptcy or two years after it ends, whichever is later | AFSA’s life-after-bankruptcy guidance |
Discharge generally releases provable debts under s 153(1), subject to the exceptions and qualifications in that section. It does not release every liability or prevent a secured creditor exercising preserved security rights. Nor does discharge prevent prosecution for an earlier bankruptcy offence: s 275 expressly preserves that possibility.
Confirm the actual discharge date before relying on the end of bankruptcy restrictions in Australia. The expected anniversary is insufficient where an objection is in effect or the statutory commencement date was misunderstood.
Questions about bankruptcy restrictions
Do I need to tell every employer that I am bankrupt
There is no universal employer-disclosure rule in the Bankruptcy Act. The answer may change with the position, contract and applicable occupational legislation. Consider company management, regulated work, and income reporting separately. Check the requirements governing the actual role.
Can I borrow less than the indexed threshold without disclosure
The monetary disclosure requirements in s 269 depend on the relevant transaction and applicable aggregate. A smaller amount is not a general exemption from every disclosure duty: business-name dealings have a separate rule, and you must still answer lender requests accurately.
Can the trustee stop me going on holiday in Australia
Section 272 does not require consent for domestic travel. However, bankruptcy restrictions still require compliance with lawful attendance and information obligations. A holiday does not excuse missing an examination or ignoring a trustee’s reasonable attendance request.
Does my partner paying for travel remove the restriction
No. The source of funding may be relevant to the application, but an undischarged bankrupt still needs written consent before overseas travel and preparatory acts caught by s 272(1)(c).
Does discharge let me sell a house that vested in the trustee
No automatic right to sell arises from discharge. Establish who holds the legal and beneficial interests and obtain advice about the trustee’s position. The end of personal bankruptcy restrictions in Australia does not itself revest property.
Law and indexed amounts checked on 5 October 2026. The two real-world examples are hypothetical illustrations; the case examples describe reported decisions.
