Only 5.3% of Failed Companies Paid Unsecured Creditors: ASIC's Warning, Centrelink Debts and AI's New Legal Battles

28 October 2026 | Legally Insightful

Imagine supplying a business with $10,000 worth of goods, watching that business collapse, and discovering that your prospects of recovering anything are extraordinarily slim.

Now imagine receiving a Centrelink debt notice relating to income you earned more than a decade ago.

And while you're dealing with all that, artificial intelligence is creating digital replicas of human workers and raising questions about just how much employee surveillance is acceptable.

Welcome to another day in law, finance and business.

Several developments reported on Tuesday, 27 October 2026, highlight a common theme: the difference between having rights on paper and being able to exercise them in practice.

From ASIC's latest insolvency findings to new privacy complaints against an AI company, here are seven stories worth understanding.

1. ASIC reveals a confronting truth about company liquidations: creditors rarely recover their money

Australia's corporate regulator has released detailed research into what happens when insolvent companies are wound up.

And the findings are sobering.

On 27 October, the Australian Securities and Investments Commission (ASIC) published Report 843, examining 26,664 grouped liquidation appointments between July 2021 and June 2025.

The review included 7,023 court liquidations and 19,641 creditors' voluntary liquidations.

The figures reveal just how little money is often left when businesses finally collapse.

Among finalised liquidations examined:

• Only 5.3% paid a dividend to ordinary unsecured creditors.
• Where a dividend was paid, the median return was 9.8 cents in the dollar.
• Around half realised no more than $10,000 in gross assets.
• Approximately one-quarter realised no assets at all.

ASIC also found that around one in five appointments involved a company with at least one director who had previously been a director of another company when it entered liquidation.

These findings are historical statistics from the review population, not a forecast of the outcome of any particular liquidation. ASIC

Why does this matter?

When a business becomes insolvent, its assets generally must be dealt with according to the applicable legal priorities.

Certain secured creditors and priority claims can rank ahead of ordinary unsecured creditors.

That means unpaid suppliers and other unsecured creditors may receive very little, even when their debts are genuine and undisputed.

The distinction matters because winning an argument about what somebody owes you is not the same thing as recovering the money.

A $20,000 invoice might be legally enforceable. But if the debtor has no recoverable assets, enforcement may produce little or nothing.

For small businesses, that creates a strong commercial argument for monitoring customer payment behaviour, managing credit exposure and responding quickly when invoices become overdue.

For directors, ASIC's message is equally important: seek professional assistance early when financial difficulties emerge.

Waiting until cash has been exhausted can reduce the options available for restructuring and preserving value.

The bigger lesson: Insolvency law provides a process for dealing with failed companies. It cannot guarantee there will be money left to distribute.

Original source: ASIC — Review of insolvent liquidation outcomes, 27 October 2026

2. Centrelink is restarting collection of approximately 147,000 paused debts — but there's an important compensation deadline

A fresh report on 27 October brought renewed attention to a controversial Centrelink debt-calculation practice known as income apportionment.

Services Australia has confirmed that it is progressively restarting repayment activities for debts previously paused because they may have been affected by the practice.

Reporting obtained from Services Australia indicates that approximately 147,000 debts were paused. This refers to debts, not necessarily 147,000 separate individuals.

The restart did not begin yesterday: Services Australia says it began contacting affected people in June 2026, following legislation passed in December 2025 that retrospectively validated the historical use of income apportionment.

The October reporting has brought renewed attention to the practical consequences for people receiving repayment notices. News.com.au

What was income apportionment?

Before December 2020, Centrelink sometimes spread an individual's reported employment income evenly across multiple reporting fortnights.

This could happen when an employer's pay period did not match Centrelink's reporting periods.

The calculation could affect a person's entitlement or the amount Centrelink considered they had been overpaid.

The historical method was not consistent with the social security legislation then in force. Parliament subsequently passed legislation validating its use for historical calculations.

Services Australia distinguishes income apportionment from the separate Robodebt scheme, which involved a different income-averaging methodology.

Can affected people receive compensation?

Potentially.

The Commonwealth has established the Income Apportionment Resolution Scheme, which provides eligible applicants with a one-off payment of up to $600 per eligible debt.

Applications close on 29 January 2027.

However, there is an important legal consideration.

Accepting a resolution payment involves releasing the Commonwealth from liability for claims relating to the use of income apportionment on that debt and agreeing not to pursue certain related legal claims.

Importantly, applying for the scheme does not prevent someone from seeking a review or appeal of the underlying debt. Services Australia

What should affected people do?

Anyone who receives a notice should check the relevant debt details rather than assume the amount is necessarily correct.

They can ask Services Australia for an explanation, pursue available review rights and investigate whether they qualify for the resolution scheme.

Independent legal assistance may be particularly useful before accepting a payment that affects legal rights.

The bigger lesson: Retrospective legislation can change the legal position surrounding past government action, but it does not necessarily eliminate every avenue for challenging an individual decision.

Original sources: Services Australia — Income apportionment and restarted repayments and Income Apportionment Resolution Scheme: eligibility and legal rights.

3. Australian health-record privacy complaints jump 475%

Australia's privacy regulator has released new figures concerning the protection of personal health information.

The Office of the Australian Information Commissioner (OAIC) published its 2025–26 digital health annual report on 27 October.

It reported that privacy complaints relating to the My Health Record system increased from four in 2024–25 to 23 in 2025–26.

That's a 475% increase.

The OAIC also received 24 My Health Record data breach notifications, compared with 18 the previous year.

According to the regulator, most complaints received concerned alleged unauthorised access to personal information by health service providers.

More than 62% of the My Health Record data breach notifications arose from incorrect use of the system's emergency-access functionality. OAIC

Should Australians be worried?

The increase warrants attention, but the statistics need context.

An increase from four to 23 complaints produces a dramatic percentage, even though the absolute number remains comparatively small.

A complaint also does not automatically establish that the law has been breached.

Nevertheless, the findings highlight the importance of access controls in healthcare.

Medical information is particularly sensitive because it can reveal details about a person's health, treatment, medications and personal circumstances.

Even where a professional has legitimate access to a healthcare system, that does not necessarily authorise access to every patient's information for every purpose.

What about AI in healthcare?

The report also discusses the regulator's engagement with emerging technologies, including AI-powered medical documentation tools.

As more healthcare providers adopt digital systems, privacy compliance increasingly depends on practical controls around who can access information, how access is logged and how unusual activity is investigated.

The bigger lesson: Privacy protection isn't simply about preventing hackers from accessing databases. It also requires controlling how authorised users access sensitive information.

Original source: OAIC — Digital Health Annual Report 2025–26, published 27 October 2026

4. ASIC prepares for a significant expansion of Australia's scams complaints framework

Australians who lose money to scams may soon encounter a different regulatory complaints framework.

On 27 October, ASIC released a consultation proposing changes to Regulatory Guide 267, which deals with its oversight of the Australian Financial Complaints Authority (AFCA).

The proposed revisions reflect AFCA's expanded jurisdiction under Australia's Scams Prevention Framework.

Most substantive obligations under that framework are scheduled to commence on 31 March 2027.

The initial regulated sectors include banking, telecommunications and specified digital platform services.

ASIC is accepting submissions on its proposed guidance changes until 24 November 2026. ASIC

What's actually changing?

The Scams Prevention Framework is intended to establish enforceable obligations for regulated businesses to take appropriate action to prevent, detect, disrupt, report and respond to scams.

AFCA will provide an external dispute resolution mechanism for eligible complaints involving regulated businesses.

The framework is designed to address an important problem: scam victims can face difficulties identifying which business is responsible for an inadequate response when several services are involved in a fraudulent transaction.

The new system does not mean every victim will automatically receive reimbursement.

Individual outcomes will depend on the applicable requirements, the conduct of relevant businesses and the circumstances of the complaint.

Why does ASIC's consultation matter?

ASIC's proposed guidance clarifies the distinction between statutory requirements, AFCA's scheme rules and the regulator's expectations.

It's an important piece of the regulatory infrastructure needed for the expanded framework.

For businesses within the regulated sectors, the change will place additional attention on scam prevention, internal complaint handling, evidence retention and cooperation with external dispute resolution.

For consumers, it is another step towards a more coordinated system for dealing with scams.

The bigger lesson: Consumer protection increasingly depends on requiring organisations to identify and respond to foreseeable risks before losses occur.

Original sources: ASIC consultation CS 66 — AFCA oversight and ACCC — Scams Prevention Framework.

5. Privacy campaigners accuse an AI company of excessive worker surveillance

Artificial intelligence is transforming workplaces, but a new European privacy dispute highlights the people doing much of the work behind the technology.

On 27 October, European privacy organisation noyb announced that it had filed five complaints against Scale AI in France, Italy, the Netherlands and Austria.

The complaints concern Outlier, a platform used by freelance workers to perform tasks associated with developing and evaluating AI systems.

The organisation alleges that the platform collects excessive personal information through intrusive monitoring and identity-verification practices.

According to the complaints, certain monitoring tools can track keystrokes and mouse movements, while workers may be required to submit identity documentation and facial videos.

Scale AI had not immediately responded to Reuters' request for comment at the time of its report.

These are allegations requiring regulatory assessment, not established findings that Scale AI has violated European privacy law. noyb.eu

The legal question

Employers and businesses may have legitimate reasons to monitor work, secure confidential information and verify user identities.

However, privacy laws can impose restrictions on the extent of monitoring, the information collected and how that information is used.

The question is whether the monitoring is necessary, proportionate, transparent and supported by an appropriate legal basis.

That becomes especially difficult when workers depend on digital platforms for access to employment opportunities.

The bigger lesson: AI may automate tasks, but it does not remove the privacy rights of the humans helping to develop it.

Original sources: noyb — Five complaints against Scale AI, 27 October 2026 and Reuters — AI worker surveillance allegations.

6. AI-generated fashion models raise a new question: who owns your digital face?

Imagine agreeing to appear in a clothing advertisement.

You attend a photoshoot, receive payment and expect that the resulting photographs will be used in an agreed campaign.

But what happens if the company later uses artificial intelligence to create a digital version of you?

Could that replica appear in new advertisements without another photoshoot?

Could your facial features be changed or your likeness combined with another person's body?

Reuters published an investigation on 27 October examining how fashion businesses are seeking contractual rights to use AI-generated images and digital replicas.

The reporting included interviews with modelling-agency directors and a review of proposed contracts.

Some proposed contractual terms contemplated creating digital replicas, altering appearances or using model images to train AI systems.

The report also recorded responses from brands explaining or qualifying their AI practices. The existence of proposed contractual wording does not establish that all the contemplated uses occurred. Reuters

Why this matters legally

Traditional modelling contracts commonly address image licensing, permitted uses, payment, duration and territory.

AI complicates all of those concepts.

A single photograph might become the basis for a reusable digital likeness capable of appearing in advertisements that never involved the original model.

That raises questions about consent, contractual interpretation, intellectual property and individual likeness rights.

Some jurisdictions have introduced specific protections, while legal approaches differ internationally.

For Australian businesses, a sensible starting point is to use clear contractual language covering AI alterations, replica creation, permitted uses, duration, compensation and consent.

A broader concern

This issue extends beyond professional models.

Actors, influencers, voice artists, presenters and ordinary employees may all face questions about the commercial use of their digital likenesses.

The bigger lesson: Permission to use a photograph should not automatically be assumed to include every imaginable future AI-generated use.

Original source: Reuters investigation — AI face swaps and digital clones, 27 October 2026

7. Alibaba secures a US court injunction in a dispute involving Pentagon contracting restrictions

A significant US court development illustrates the increasingly complicated relationship between international business, government procurement and national security.

Reuters reported on 27 October that a US federal judge had granted Alibaba a preliminary injunction relating to restrictions associated with the company's inclusion on a Pentagon list.

The underlying ruling was made on Monday, 26 October, in the United States.

The injunction limits the government's ability to deny Pentagon contracts to other businesses merely because they engage lobbying firms that also represent Alibaba.

It does not remove Alibaba from the Pentagon list, and the broader legal dispute remains unresolved.

Alibaba denies the underlying allegations concerning military connections. Reuters

Why this matters

Government procurement rules can have commercial consequences extending far beyond the company directly named in a restriction.

They may affect suppliers, contractors, professional advisers and commercial relationships.

However, preliminary judicial relief is not the same thing as a final determination on the merits.

In this case, the injunction addresses a particular consequence of the restrictions without resolving the broader designation dispute.

For international businesses, the case highlights the importance of understanding how procurement conditions and national security measures can affect otherwise ordinary commercial arrangements.

The bigger lesson: A court ruling can provide meaningful interim protection without resolving the underlying legal dispute.

Original source: Reuters — Alibaba injunction, reported 27 October 2026

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What connects today's stories?

Seven stories. Several countries. One recurring theme.

Legal rights and protections only work when people understand how to use them.

ASIC's insolvency findings demonstrate that even a valid debt may be difficult to recover.

The Centrelink developments highlight how legislation can change the legal consequences of historical government action.

Australia's privacy and scams regulators are confronting questions about accountability, information handling and compensation.

Meanwhile, artificial intelligence is testing longstanding assumptions about workplace privacy and the commercial use of human identity.

For businesses, the lesson is to manage risks before they become disputes.

For consumers, the lesson is to understand both the protections available and the limitations of those protections.

And for everyone else?

It's another reminder that the law isn't confined to courtrooms.

It affects our savings, our workplaces, our personal information and even the photographs we agree to have taken.

That's why understanding these developments matters.

Frequently asked questions

What happens to unpaid suppliers when a company goes into liquidation?

Unpaid suppliers who are ordinary unsecured creditors generally rank behind relevant secured and priority claims. Recovery depends on available assets, applicable legal priorities and liquidation costs.

Can Centrelink restart repayments on historical income-apportionment debts?

Yes. Services Australia says legislation has validated historical use of the calculation method and it is progressively restarting paused debt activities. Affected people retain available rights to seek explanations and reviews.

When does Australia's Scams Prevention Framework commence?

Most substantive obligations for the initially regulated sectors are scheduled to commence on 31 March 2027. Certain membership requirements commenced earlier.

Can a company use AI to reproduce someone's face without permission?

The answer depends on the jurisdiction, applicable laws and contractual arrangements. Businesses should not assume that an agreement to use a conventional image automatically authorises unrestricted digital replication.

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Legally Insightful provides independent legal, financial and business news commentary for general information and educational purposes. This article does not constitute legal, financial, taxation or investment advice. Readers should obtain advice appropriate to their circumstances before making decisions. Figures, proceedings and regulatory proposals reflect information available as at the morning of 28 October 2026 (AEST).

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