Tasmania's auditor-general says that Spirit of Tasmania operator TT-Line was insolvent in August, but the state-owned company has disputed that claim.

Auditor-General Michael Thompson released a report on Monday into the financial statements of state entities, pointing out the financial challenges facing TT-Line, along with the Motor Accidents Insurance Board (MAIB).

His assessment of TT-Line came after its borrowing limit was increased from $990 million to $1.4 billion, but before the government provided a $75 million equity injection .

The report stated that TT-Line could meet its short-term debts, but not for the long term.

"I developed reasonable grounds to suspect that the company would not be able to meet its longer-term debts that fall due after the relevant period," the repor

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