Noosa Care at Home Services is a fictitious Australian in-home care business. It starts as a sole trader: the owner puts in $20,000 of her own money, buys a car and delivers every visit herself (personal care, domestic help and transport for older clients), funded through home-care packages and paid a few weeks after each invoice.
Demand soon outgrows one person. In FY2026 she takes on her best carer as a partner. The new partner puts in $20,000 of her own, a second car is bought, and the two partners split the profit equally. Revenue jumps from $168,000 to $300,000. It is the best year the business will have.
In FY2027 the partnership takes the next step: it hires staff. Wages and super cost $280,000, two more vehicles are bought (mostly with a loan), a small office is rented, and funding bodies pay a much larger book of invoices on their own timetable. Revenue reaches $480,000, but profit falls to $54,500. The partners, used to drawing $50,000 each, keep drawing it. And the tax instalments the ATO asks for that year are based on the bumper FY2026. By 30 June 2027 the bank account is overdrawn, and the three-year forecast shows it never climbing back.
Why home care, and why a partnership
Home care is one of Australia’s fastest-growing small-business sectors, and one where the jump from one person to employer is sudden: a single new contract can mean needing two or three staff almost overnight. Labour is most of the cost, and it is paid every fortnight while the revenue it earns arrives weeks later.
Making a key employee a partner is a common way to keep her, and accountants see it often. It changes three things this chapter follows closely: the profit is split, each partner pays tax on her own share at personal rates, and each partner becomes personally liable for all of the partnership’s debts.
FY2027 is also the first year of Payday Super, from 1 July 2026: super must reach each employee’s fund within seven business days of every payday, and the ATO sees every pay run in near real time. For a first-time employer, that turns 12% super from a quarterly bill into a fortnightly one, in the same year they are learning to carry a payroll at all. (See The Payday Test page on the BusinessSolvency website.)
What the analysis shows
The owner starts the business with $20,000 of her own money, which shows as Owner’s Capital. Revenue of $168,000 is almost all margin: direct costs of $27,000 (care consumables and fuel) and modest overheads for a home office, insurance, accounting and phone. Profit before tax is $119,500.
As a sole trader, the owner pays tax on that profit personally. BusinessSolvency sets aside her personal tax at 2024–25 rates, including the Medicare levy: $29,028. Because this is her first year in business, the ATO has no history to base quarterly instalments on, so none of it is paid during the year. All $29,028 is still owed at 30 June 2025, and shows as ATO Obligations.
Owner Drawings of $62,000 sit well inside the year’s profit, and cash builds to $80,500. That looks generous, but $29,028 of it belongs to the ATO.
What an owner using BusinessSolvency sees in FY2025
All indicators green, and genuinely so. The one note that matters: the cash balance includes a full year’s tax that has not yet been paid. Next year it will be paid, and instalments will start on top of it.
What the analysis shows
On 1 July 2025 the owner’s best carer joins as an equal partner and puts in $20,000. With two carers working, revenue jumps 79% to $300,000. A second car costs $30,000. Profit before tax reaches $217,000, the best of all six years.
The partnership itself pays no income tax. Each partner pays tax on her own share, $108,500 each, at personal rates: $25,508 each, $51,016 in total. At a flat 27.5% the same profit would have been taxed $59,675, so splitting the income between two people saves $8,659.
This is also the year of the tax double hit. In the same twelve months the business pays all of FY2025’s $29,028 tax and starts quarterly instalments for FY2026, set at last year’s tax: another $29,028. That is $58,056 of tax in one year. The partners draw $50,000 each, $100,000 in total, still well inside profit, and cash climbs to $128,444, helped by the new partner’s $20,000.
What the partners see in BusinessSolvency in FY2026
Green on profit and cash. This is the year to run the FY2027 forecast before hiring anyone: wages, 12% super, vehicles, slower collections, unchanged drawings, and tax instalments set on this record year. Everything that goes wrong next year is visible from here.
What the analysis shows
The partnership hires staff. Revenue rises 60% to $480,000, but wages cost $250,000 and super another $30,000 at 12%, paid within seven business days of every payday. Fuel for more vehicles, a small office, workers’ compensation insurance and interest on a new vehicle loan follow. Profit before tax falls to $54,500, a quarter of FY2026’s.
Then the cash movements. Two vehicles cost $70,000, funded by a $60,000 loan, with $8,000 repaid in the year. Debtors rise from $20,000 to $48,000 as a bigger book of invoices is paid on the funding bodies’ timetable. The partners keep drawing $100,000, nearly twice the year’s profit.
And the tax. The ATO sets this year’s instalments from FY2026’s record profit: $51,016, plus the $21,988 balance still owing for FY2026. That is $73,004 paid in tax in a year whose own tax is only $1,315. The $49,701 overpaid will come back as a refund, but only after the year’s returns are lodged.
The bank closes the year at −$15,060, shown on the Balance Sheet as a Bank Overdraft. Cash from operations is negative (−$25,504), so DSCR reads −2.22x: this year, trading did not produce a dollar towards the new loan. Current Ratio still reads 3.11, propped up by the refund the ATO owes and by debtors not yet paid.
What the partners see in BusinessSolvency in FY2027
The first pink warnings: an overdraft, a negative DSCR, and Cash OUT exceeding Cash IN by $143,504 for the year. This is the year to act, while the gap is still small enough to close by varying the tax instalments, resetting drawings, repricing and collecting faster, rather than by borrowing or selling assets.
What the analysis shows
From here the story is a forecast, built on one assumption: nothing changes. Revenue grows 5% a year, every cost rises at least with 4% inflation, and the partners keep drawing as before, raised each year with inflation: $104,000, then $108,200 and $112,600.
The $49,701 tax refund arrives, and this year’s instalments are small because FY2027’s profit was small. That one-off refund is the only reason the overdraft shrinks a little. The platform’s reserve policy would recommend a Cashflow Reserve of one month’s cover ($29,842), but BusinessSolvency follows the rule lenders, creditors and accountants expect: debts are paid before money goes into a reserve. With the bank overdrawn, no reserve is set aside, and the partners are not asked to put money in for one. The bank still closes overdrawn at −$4,998.
The Breakeven page gives the clearest verdict: to cover every cash obligation the business carries, revenue would need to be $575,097. At $504,000 it is $71,097 short. The refund does not change that verdict, because Breakeven tests each year’s own trading and its own tax.
What the partners see in BusinessSolvency in FY2028
DSCR reads a strong 8.40x, because the refund flatters this year’s operating cash. Breakeven, the bank balance and the 3-Year Sustainable Cashflow badge all say the opposite, and the badge shows no reserve in any year, because the bank is overdrawn. The partners are taking $104,000 out of a business that earned $55,266: the clearest possible sign that drawings, not trading, are the problem.
What the analysis shows
Profit improves again, to $59,142, and DSCR reads 5.74x. Everything else deteriorates. The bank reaches −$43,118. The reserve policy’s target steps up to two months of cover ($62,350), but with the bank overdrawn none of it can be built: every spare dollar is owed to the bank first.
Revenue is $68,780 short of Breakeven. Current Ratio falls to 0.69, so short-term debts now exceed short-term assets, and Total Equity falls to $23,849, about a seventh of FY2026’s.
What the partners see in BusinessSolvency in FY2029
A deepening overdraft, a Breakeven shortfall in every year, and a business with no reserve at all to absorb a bad month. For a partnership, every dollar of that overdraft is owed by both partners personally.
Why reserves matter
This is what a business looks like without a reserve: the overdraft carries it until it can’t. The crunch comes slowly at first, then very quickly. Building a reserve before then is what keeps your business trading.
What the analysis shows
By FY2030 revenue is $556,189, more than three times FY2025, and Net Income of $63,238 is the best since the partnership began hiring. DSCR, at 6.36x, says the loan is comfortably covered.
The bank balance is −$81,857, with no reserve behind it. Current Ratio is down to 0.37, Working Capital to −$65,513 (short-term debts far exceed short-term assets), and Total Equity has fallen below zero, to −$25,513: the business owes more than it owns, and the partners carry the difference personally. Revenue is $67,386 short of Breakeven, and the 3-Year Sustainable Cashflow badge reads Not Yet Sustainable in every year. In practice, no bank extends an overdraft this deep without security, and for partners the security is usually their homes.
What the partners see in BusinessSolvency in FY2030
Profit and DSCR at their best since the partnership began hiring; every cash and Breakeven measure at its worst. The story ends here because a real business would not reach this point: the bank or the ATO would have stepped in first. The earlier the partners act, the more of the choice stays theirs.
How does a business make a $53,185 profit and still lose $143,504 of cash in the same year? The bridge below takes FY2027’s opening cash to its closing cash, using the engine’s own figures.
| FY2027 cash movement | Amount |
|---|---|
| Opening cash, 1 July 2026 | $128,444 |
| Net Income (after this year’s tax of $1,315) | +$53,185 |
| Add back depreciation (not a cash cost) | +$14,000 |
| Income tax: this year’s tax less tax actually paid ($1,315 less $73,004) | −$71,689 |
| Debtors grow as funding bodies pay a bigger book more slowly | −$28,000 |
| Consumables stock builds | −$1,500 |
| Suppliers owed more | +$5,000 |
| GST collected but not yet paid to the ATO | +$3,500 |
| Two vehicles bought | −$70,000 |
| Vehicle loan drawn | +$60,000 |
| Loan repayments | −$8,000 |
| Partners’ Drawings | −$100,000 |
| Closing cash, 30 June 2027 | −$15,060 |
Three movements do most of the damage. Drawings of $100,000 exceed profit by $46,815 on their own. Tax instalments set on the record year take $71,689 more than this year’s own tax. And growth ties up $28,000 in unpaid invoices. None of these appear on the profit and loss statement. All three are visible, and forecastable, in BusinessSolvency.
Noosa’s tax follows the rules an Australian sole trader or partner actually lives with, and BusinessSolvency models them the same way for every business:
The partnership pays no income tax itself. It lodges a return showing the profit and how it is split, and each partner pays tax on her share at personal rates, with the Medicare levy and the Low Income Tax Offset. That is why Noosa’s tax line reads “Partners’ tax set aside”, and why it is lower than a flat company rate when the profit is shared.
No instalments in the first year. A new business has no tax history, so its first year’s tax is paid after the year ends.
After that, quarterly PAYG instalments based on last year. During each year the ATO collects instalments worked out from the previous year’s income. After the year’s returns are lodged, any balance is paid, or any overpayment refunded.
| Year | This year’s tax | Instalments paid | Last year’s balance settled | Total tax paid in cash | Owing (refund) at 30 June |
|---|---|---|---|---|---|
| FY2025 | $29,028 | $0 | n/a | $0 | $29,028 owing |
| FY2026 | $51,016 | $29,028 | $29,028 | $58,056 | $21,988 owing |
| FY2027 | $1,315 | $51,016 | $21,988 | $73,004 | ($49,701) refund due |
| FY2028 | $1,534 | $1,315 | ($49,701) refund received | ($48,386) net received | $219 owing |
Two lessons follow. First, the second-year double hit: in FY2026 the business pays a full year’s tax and a year of instalments in the same twelve months. Second, instalments follow last year, not this year: when profit falls, as it does when staff are hired, the instalments keep coming at the old level unless the partners act.
What an accountant would do here
When income is expected to fall, a taxpayer can vary their instalments for the rest of the year. Had the partners varied FY2027’s instalments down to match the year’s real tax, about $49,700 would have stayed in the business, and the bank would have closed FY2027 at roughly +$34,600 instead of −$15,060. A variation needs care: if it proves too low, the ATO can charge interest. That is a conversation for the partners’ accountant, and BusinessSolvency’s forecast is the evidence that starts it.
Noosa Care passes the test most owners watch in every single year: Net Income is positive in all six. DSCR is strong in every forecast year, between 5.74x and 8.40x. By those measures, this is a business that is growing, profitable and comfortably meeting its loan repayments.
The tests that tell the real story are different ones:
| Year | Net Income | DSCR | Bank balance | Breakeven gap | Current Ratio | Total Equity |
|---|---|---|---|---|---|---|
| FY2025 | $90,472 | No debt | $80,500 | — | 2.69 | $82,472 |
| FY2026 | $165,984 | No debt | $128,444 | — | 4.83 | $168,456 |
| FY2027 | $53,185 | −2.22x | −$15,060 | — | 3.11 | $121,641 |
| FY2028 | $55,266 | 8.40x | −$4,998 | −$71,097 | 2.03 | $72,907 |
| FY2029 | $59,142 | 5.74x | −$43,118 | −$68,780 | 0.69 | $23,849 |
| FY2030 | $63,238 | 6.36x | −$81,857 | −$67,386 | 0.37 | −$25,513 |
DSCR measures whether the business earns enough to meet its loan repayments. It does not see Partners’ Drawings or growing debtors, and in FY2028 a one-off tax refund flatters it. Breakeven and the Sustainable Cashflow Formula (all Cash IN must equal or exceed all Cash OUT) look at every obligation the business carries, including the partners’ drawings. They fail in every forecast year, and the bank balance confirms it.
This chapter deliberately shows the uncorrected path. Ridgeline (Chapter 8) shows a correction worked through in full; Noosa shows why the timing of that correction matters. In FY2027, with the overdraft at −$15,060, the partners still have cheap, owner-controlled options:
Vary the tax instalments. FY2027’s instalments were set on FY2026’s record profit. Varying them down to the year’s real tax keeps about $49,700 in the business when it is needed most (Section 8C.10).
Reset drawings to what the business now earns. $50,000 each was affordable in the two-person years. With a payroll to carry, the business earns about $27,000 per partner after tax. Drawings closer to that close most of the annual gap on their own.
Price for the new cost base. Wages and super are now 58% of revenue. Hourly rates, travel charges and minimum visit lengths set for two working partners rarely cover an employed carer plus 12% super, insurance and a vehicle.
Collect faster. Debtors rose by $28,000 in FY2027. Invoicing weekly rather than monthly, and following up funding bodies promptly, releases cash already earned.
Talk to your accountant early. The accountant who sees these numbers is best placed to help, and a first conversation with the Small Business Debt Helpline (1800 413 828) is free.
Section 8C.13 models drawings, the largest single lever, through the engine. The others depend on the partners’ own figures, which is precisely what the forecast module (Chapter 7) is for.
To show what the timing is worth, the same six years were run through the BusinessSolvency engine a second time, with one change only: from FY2027, the partners draw no more than the business actually earns after tax ($53,000, then $55,000, $59,000 and $63,000, shared between them). Revenue, wages, super, vehicles, the loan, debtors and the tax instalments are identical in both versions. The one knock-on difference is the reserve: with the bank in credit, the reset version can build the platform’s recommended reserve, with the partners’ recommended top-ups, while the carry-on version cannot, because debts come first.
| Year | Drawings: carry on | Drawings: reset | Bank: carry on | Bank: reset | Equity: carry on | Equity: reset |
|---|---|---|---|---|---|---|
| FY2027 | $100,000 | $53,000 | −$15,060 | $31,940 | $121,641 | $168,641 |
| FY2028 | $104,000 | $55,000 | −$4,998 | $82,049 | $72,907 | $189,796 |
| FY2029 | $108,200 | $59,000 | −$43,118 | $76,875 | $23,849 | $206,193 |
| FY2030 | $112,600 | $63,000 | −$81,857 | $62,904 | −$25,513 | $217,073 |
With drawings reset, the bank account is never overdrawn, even in FY2027 with the tax instalments unchanged, and the reserve is built in full: $97,825 by FY2030. Counting the reserve, the partnership holds $160,729 by FY2030, against an overdraft of $81,857 and no reserve if nothing changes. Total Equity grows every year to $217,073, instead of falling below zero to −$25,513. The difference by FY2030 is $242,586: the $194,800 of extra drawings taken over four years, plus the $47,785 the partners put back into the reserve in the reset version. It is the difference between a business with a funded reserve and money in the bank, and two partners whose overdraft is secured against their homes.
The honest part
Resetting drawings is not painless. It means each partner living on $26,500 to $31,500 a year instead of the $52,000 to $56,300 the plan assumes, less than they pay their own staff. That is itself the most important signal in this chapter: at its current prices, the business can no longer pay its partners a working wage. Drawings buy the time; pricing, collections, staff scheduling and varied instalments (Section 8C.12) are what restore the partners’ income. Seeing that in FY2027, with the forecast, is what BusinessSolvency is for.
Every year the partners wait, one more option closes and the decision moves further out of their hands. Noosa’s dates line up with the three urgency pages on the BusinessSolvency website:
| When | What is still possible | Who decides |
|---|---|---|
| FY2026, before hiring | Run the FY2027 forecast first. Set prices, drawings, a tax account and the instalment plan for the new cost base before the first employee starts. Cost: nothing. | The partners |
| FY2027, first months of payroll | Vary the instalments, reset drawings, reprice visits, invoice weekly, chase funding bodies. The overdraft is still small and the bank relationship untouched. (The Closing Window) | The partners |
| 30 June 2027 | The ATO’s first-year Payday Super leniency ends on the last day of Noosa’s hiring year. From FY2028, a missed super payment is seen within days, not at year end. (The Payday Test) | The partners, with the ATO watching |
| FY2028–FY2029 | A persistent overdraft, with no reserve behind it, typically brings a facility review and a request for security (for partners, usually their homes). Options narrow to payment plans and asset sales. | Increasingly the bank |
| FY2030 | By this point a lender would normally have acted already. The choices left are theirs, not the partners’. (The Cost of Waiting) | The creditors |
The forecast figures for FY2028–FY2030 show the path if nothing changes. The creditor actions described are what typically happens at those levels of overdraft, not events recorded in the demonstration data.
In a partnership, the business debt is each partner’s debt
Noosa has no company between its debts and its partners. The overdraft and the vehicle loan are owed by the partners personally, and a creditor can generally pursue either partner for the whole amount, not just her half. The partner who joined in FY2026 brought $20,000 of capital, but her $20,000 does not limit what she can lose: every dollar of the overdraft built up after she joined is hers too.
Australia’s own figures show where that road ends. In 2024–25 the median liability in a business-related bankruptcy was $206,840, and 88.2% of business-related personal insolvencies ended in bankruptcy (Australian Financial Security Authority). The cost is not only financial: 64% of Small Business Debt Helpline cases in 2025–26 were tied to a change in the owner’s personal life, such as a relationship breakdown or illness. See The Cost of Waiting for the full picture, and a calculator for your own figures.
Help is free and confidential: the Small Business Debt Helpline on 1800 413 828, or a first conversation with your accountant. The earlier the conversation, the more of the choice stays yours.
First, that taking on staff can turn a healthy partnership cash-negative in a single year, while it keeps making a profit. Noosa earns a profit in all six years, and its bank account is overdrawn in four of them.
Second, that tax timing is a cash event an owner can plan for. The second-year double hit and instalments set on a better year are invisible on the profit and loss statement and obvious in the forecast. BusinessSolvency shows exactly what will be paid to the ATO each year, and when.
Third, that the warning arrives early in the right indicators. The bank balance, Breakeven and the Sustainable Cashflow Formula turn in FY2027, the year the staff are hired, while Net Income stays positive and DSCR is strong in every forecast year. Partners monitoring each quarter would see the gap within the first quarter of payroll, not at tax time.
Fourth, that for a partnership the consequence is personal, and shared. There is no company, no safe harbour and no Small Business Restructuring. The overdraft and the loan are owed by both partners.
Fifth, read alongside Chapter 8, that timing is everything. Ridgeline and Noosa share the same underlying habit, drawings outrunning profit. Ridgeline’s owner corrects it and recovers through discipline alone. Noosa’s partners do not, and the same habit, now carrying a payroll, compounds year after year. The cheapest point to act is the year the numbers first turn.
The key figures for all six years, straight from the BusinessSolvency calculation engine. Partners can stop here, or read on.
In short: every key figure for FY2025–FY2030 in one table, with the cash movements and the solvency ratios year by year.
| Figure | FY2025 | FY2026 | FY2027 | FY2028 (F) | FY2029 (F) | FY2030 (F) |
|---|---|---|---|---|---|---|
| Revenue | $168,000 | $300,000 | $480,000 | $504,000 | $529,200 | $556,189 |
| Net profit (Net Income) | $90,472 | $165,984 | $53,185 | $55,266 | $59,142 | $63,238 |
| Partners’ tax set aside | $29,028 | $51,016 | $1,315 | $1,534 | $2,758 | $4,051 |
| Trading cash (operating cash flow) | $122,500 | $157,944 | −$25,504 | $126,062 | $82,080 | $85,861 |
| of which set aside into the cash reserve | $0 | $0 | $0 | $0 | $0 | $0 |
| Spent on equipment and buildings | $0 | −$30,000 | −$70,000 | $0 | $0 | $0 |
| New borrowing | $0 | $0 | $60,000 | $0 | $0 | $0 |
| Loan repayments | $0 | $0 | −$8,000 | −$12,000 | −$12,000 | −$12,000 |
| Partners’ money put in | $20,000 | $20,000 | $0 | $0 | $0 | $0 |
| Partners’ reserve top-up | $0 | $0 | $0 | $0 | $0 | $0 |
| Partners’ drawings | −$62,000 | −$100,000 | −$100,000 | −$104,000 | −$108,200 | −$112,600 |
| Cash at start of year | $0 | $80,500 | $128,444 | −$15,060 | −$4,998 | −$43,118 |
| Cash at year end | $80,500 | $128,444 | −$15,060 | −$4,998 | −$43,118 | −$81,857 |
| Cash reserve held (a separate asset) | $0 | $0 | $0 | $0 | $0 | $0 |
| ATO amounts owing | $29,028 | $21,988 | $0 | $219 | $1,224 | $1,293 |
| Long-term debt | $0 | $0 | $52,000 | $40,000 | $28,000 | $16,000 |
| Suppliers owed (trade creditors) | $3,000 | $5,000 | $10,000 | $10,500 | $11,000 | $11,500 |
| Sustainable Cashflow target: revenue above (+) or below (−) it | +$85,665 | +$87,878 | −$120,382 | −$71,097 | −$68,780 | −$67,386 |
| Loan cover (DSCR): trading cash ÷ loan repayments | no loan | no loan | −2.22 | 8.40 | 5.74 | 6.36 |
| Current Ratio: short-term assets ÷ short-term debts | 2.69 | 4.83 | 3.11 | 2.03 | 0.69 | 0.37 |
- Cash check: each year’s cash at year end equals cash at the start of the year, plus trading cash, less equipment and buildings, plus or minus the financing lines above; and each year starts with the previous year’s closing cash. It agrees to the dollar in all six years.
- Tax: the partners’ personal income tax on their equal shares of the profit, at the rates legislated for each year (with the Medicare levy and the Low Income Tax Offset), set aside in the business’s figures.
- The cash reserve: money set aside into the reserve is taken out of trading cash and held as a separate asset, so “cash at year end” is the cash left free after the reserve. In this forecast none is set aside, because the bank is overdrawn every year and debts are paid first.
- The Sustainable Cashflow target counts every cash payment, including equipment, loan repayments and partners’ drawings, and counts new borrowing and money put in by the partners as cash in (Chapter 3).
- Scores: the BusinessSolvency score is 20 out of 100 for the actual years and 40 for the forecast.
- See it live: during alpha testing, request access to open this business’s forecast in the BusinessSolvency app.