Mixing business and personal expenses? It could cost you, especially in a liquidation

It is easy for small business owners to blur the line between personal and company finances, especially when you are managing everything yourself. But this can create serious personal risk if your business ever goes into liquidation.

How it works

When a company enters liquidation, a registered liquidator must investigate all financial transactions and assess whether directors have acted in accordance with the Corporations Act.

If the liquidator finds that the director has withdrawn company funds for personal use without declaring them as wages or reimbursements, those transactions may be treated as loans. That means the liquidator can legally demand repayment from the director personally.

Why this happens

The liquidator’s role is statutory. They are obligated to protect creditor interests and recover any funds that should rightfully belong to the company. Any personal expenses paid from a business account, such as fuel, groceries or rent, can create personal liability if not properly accounted for.

How to protect yourself

• Never mix personal and company funds.
• Record all payments to yourself as wages or dividends, not casual withdrawals.
• Keep detailed records of business transactions.
• Seek advice before liquidation to understand and manage your exposure.

Liquidation needs to be managed properly. Being unprepared can create further issues. BDK Risk Management helps directors understand their risks and navigate liquidation with confidence.