What happens to my pay if my employer goes bankrupt in Australia? — full 2026 guide

When an Australian employer becomes insolvent (formal liquidation or bankruptcy), the Commonwealth steps in. The Fair Entitlements Guarantee (FEG), established under the Fair Entitlements Guarantee Act 2012, pays affected employees up to:

• 13 weeks of unpaid wages
• 4 weeks of unused annual leave
• 4 weeks of unused long service leave
• 16 weeks of redundancy pay (per NES scale, capped at 16)

All capped at a weekly rate of approximately A$2,914.50 for 2026 (indexed annually). Above-cap shortfalls become unsecured creditor claims with the liquidator.

FEG applies when:

• Your employer is in formal liquidation (liquidator appointed by court or creditors)
• Your employer is in bankruptcy (trustee in bankruptcy appointed)
• You were an Australian-based employee (not contractor)
• The insolvency event happened within the last 12 months

FEG does NOT apply when:

• Your employer is in voluntary administration (DOCA stage) — wait for the outcome
• Your employer is still trading (use FWO or small claims instead)
• You were a contractor (no employer-employee relationship)
• Your employer is overseas-based with no Australian incorporation

Major FEG-triggering insolvencies in 2024-25-26:

• Porter Davis Homes — March 2023 collapse, 1,700+ employees + thousands of contractors. FEG payouts still being processed in 2026.
• Bonza Airlines — April 2024 liquidation, ~330 cabin and ground staff. FEG payouts processed late 2024-2025.
• Star Entertainment (various) — 2024-25 restructures and asset sales. Casino-floor + hospitality casuals.
• Godfrey's, Booktopia, various retail chains — 2024-25, hundreds of retail workers.
• Construction sector collapses — ongoing throughout 2024-26 (Probuild, Beth Air, multiple residential builders following Porter Davis pattern).

The FEG scheme processed approximately A$280-320M in claim payouts in FY24-25 (final figures pending Annual Report).

1. Wait for formal liquidation or bankruptcy. An external administrator must be appointed for FEG to apply.
2. Visit ag.gov.au/industrial-relations/feg and use the online claim form. You have 12 months from the insolvency event to lodge.
3. Provide supporting documentation: employment contract, last 3 payslips, calculation of unpaid entitlements, proof of identity, liquidator/trustee contact details.
4. Wait approximately 14-16 weeks for FEG assessment and payment. Payment goes direct to your nominated bank account.
5. If your gross weekly pay was above the FEG cap (~A$2,914.50/wk), lodge the shortfall as an unsecured creditor claim with the liquidator. Realistic recovery is typically 0-10c in the dollar.

FEG does NOT cover unpaid superannuation. If your employer hasn't paid your super (common in pre-insolvency periods), recover it separately:

1. Submit an Unpaid Super Enquiry to the ATO via the ATO Business Portal or by phone (13 10 20).
2. The ATO pursues the liquidator for the unpaid Superannuation Guarantee Charge.
3. Where the SG is unrecoverable from the employer (typical in liquidation), the ATO pays it directly to your super fund from the ATO trust account.
4. Process takes 6-18 months, longer than FEG. Persistence pays off.

Tax treatment of FEG payments: wages component is assessable income for tax. Redundancy component receives concessional tax treatment (tax-free portion of approximately $12,524 + $6,264 per year of service for 2025-26, indexed annually).

Centrelink while waiting: if you're out of work and waiting for FEG (14-16 weeks), you may be eligible for JobSeeker. Centrelink may recover some payments from your FEG payout, but you'll usually still come out ahead.

Free legal help: JobWatch (Victoria), Working Women's Centres (each state), Redfern Legal Centre (NSW) and similar community legal centres offer free advice on employer-insolvency entitlements.

Run your specific situation through the FEG Claim Calculator for an estimated payout total. For complex matters (large amounts, contested entitlements, partial-year service), consult a free legal aid service or specialist insolvency-law firm.