Engaging with a major creditor on small business restructuring plans

A shout out to the ATO.

Over the years, the Australian Taxation Office (ATO) has often been the subject of comment on how it approaches taxpayers, debt collection, and company attempts at restructuring.

For accountants, they’re thinking about how to deal with the ATO for their client’s affairs in circumstances where tax debt has accumulated out of control. For the taxpayers themselves, they’re contemplating or troubled with dealing with that accumulation of debt and the ever-present risk of receiving a winding up notice and/or director penalty notice. And of course the insolvency practitioners advising taxpayers wishing to attempt a restructuring through to making a recommendation to creditors.

The ATO is often the largest creditor in a proposed small business restructuring plan. Sometimes they are the only creditor. Given the acceptance of the proposal is achieved by reaching a majority in value of those voting on any proposal, engaging with the ATO ahead of voting is critical. Thankfully the ATO is willing to engage with small business restructuring practitioners. From our recent experiences with small business restructuring and the ATO, the ATO have set up a dedicated team to deal with such proposals, and to allow engagement on draft proposals ahead of voting. This not only assists the small business restructuring practitioner in getting feedback on their report and recommendation, but also assists in ensuring the proposal has the best chance for success. This not only assists the small business restructuring practitioner and the director, but the business itself by maximising its chances of continued trade under an accepted small business restructuring plan. This benefits ongoing suppliers, landlords, employees, and the owners themselves in the pursuit of actual business recovery for at least the short- to medium term[1].

While no one likes paying tax, we all appreciate it must be done. I’d like to give a shout out (as a small business practitioner) to the ATO for getting positively involved and working with the process to get the best result for all concerned.

If you’d like to learn more or are interested in a small business restructuring plan for your business or your clients’ businesses, we’re here to help. We appreciate that business can be tough, particularly in the COVID-era we’re all living in. We’ll help you consider what can be done to turn a business around, exploring restructuring options that can buy you valuable time to get back on your feet.

[1] A restructuring plan is limited to a three-year term.