This depends on what you mean by “failing”. If it is just an exaggeration (as in if you are barely passing), you could be assessed based on your university results (provided you have completed 1 year of full time study or equivalent) or ATAR, whichever gives you the better chance of receiving an offer.
If you mean it literally (i.e. if you failed one or more subjects) then it is likely that you have not completed 1 year of full time study (given that you are in the second semester of your first year) and you will therefore most likely be assessed using your ATAR.
Lastly, your ATAR does not expire. This means that if you wish for your university results to be considered instead of your ATAR, you must ensure that they are sufficiently high. The ATAR becomes irrelevant when seeking entry into postgraduate degrees, a typical requirement of which is the completion of a Bachelor’s degree.
I hope this helps!