Taxation office is being far more aggressive in its debt collection, say insolvency practitioners
With the Australian Taxation Office (ATO) intensifying its efforts to collect outstanding tax debts, Insolvency Australia has urged small business owners to maintain strict tax compliance, highlighting the end of the financial year as an optimal time for businesses to review their tax status.
“The ATO is hellbent on collecting what it’s owed and is really doubling down on compliance,” said Gareth Gammon (pictured above left), director of Insolvency Australia. “In addition to increasing the number of Director Penalty Notices (DPNs) being issued, the ATO is also taking to the courts. In May, winding-up applications spiked, primarily driven by the ATO.
“And it’s not just the ATO initiating wind-ups; other creditors including the big four banks are also becoming increasingly active. Last month, there were record high insolvencies, tracking more than 50% above pre-pandemic levels. That’s why the end of the financial year is ideal to assess the state of your tax situation, collect outstanding customer payments, and give your business a ‘health check’ to determine how it’s going.”
“The ATO is being far more aggressive in its debt collection,” saidJosh Taylor (pictured above centre), managing director of Taylor Insolvency and an Insolvency Australia member. “It’s now issuing even more DPNs, both before and after liquidations.
“That’s why it’s important for accountants to always follow up clients to ensure Business Activity Statements are lodged on time or within three months of their due date.”
Chris Baskerville (pictured above right), a partner with Jirsch Sutherland and Insolvency Australia member, advised businesses to be transparent about their financial difficulties.
“Lodge your tax returns on time – otherwise, statutory bodies will give you no leeway if they have no oversight of the state of your business,” he said. “One of the first things the ATO will ask when a business gets into trouble is whether they have paid employee benefits such as superannuation, so it’s wise to ensure these payments are up to date.”
Baskerville also recommended preparing a 12-month cash flow forecast to anticipate the business’s financial landscape.
“Businesses naturally have ebbs and flows of income and expenses, so the trick is to save when the money is flowing in, so you have the funds available for slower months when there is less income and more expenses,” he said.
Baskerville also noted a significant rise in small business restructuring (SBR) plans.
“There has been a 400% increase in SBRs over the past year,” he said. “SBRs can save businesses $700,000 to $800,000 in debts.”
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