Current landscape
Considering the evolving economic landscape and the firm stance taken by the Australian Taxation Office in recovering tax debts, it is imperative for small to medium-sized enterprises (SME) to be well-versed in restructuring laws and practices. As your trusted restructuring advisors, we are here to provide you with essential insights and guidance tailored to the Australian market.
Australian Business Restructuring Framework
Australia’s corporate restructuring framework was designed to support businesses facing financial distress. The Small Business Restructuring Process (SBRP), effective from 1 January 2021, allows eligible SME businesses to restructure their debts, offering a lifeline to those struggling to stay afloat. Whereas the voluntary administration process can be a flexible tool to restructure businesses with debts exceeding $1m.
Early Intervention is Key
The best outcomes often result from quick action. If you are experiencing continued losses from unprofitable contracts or business divisions or have large, accumulated tax liabilities, it is crucial to address these issues promptly to avoid the potential risk of business failure as well as personal liability.
We recommend that directors prioritise the following:
- Prompt payment of superannuation contributions. Consistently meeting this obligation is important as it frequently becomes a bottleneck in the SBRP. Delays can escalate, particularly with late superannuation contributions—even a delay of a single day. Such tardiness disqualifies you from claiming the respective penalties and interest charges as tax deductions.
- Ensuring on-time submissions of BAS statements. This is important even when immediate tax payment is not feasible for the business. A solid lodgment record with the ATO can be influential during debt negotiation discussions. Moreover, it is imperative for directors to address this promptly, as they may face personal liability for the company’s tax liabilities via director penalty notices—a matter that is currently receiving significant attention.
Restructuring Options
For viable businesses, restructuring can be a practical solution. The SBRP aims to simplify the debt restructuring process, enabling SMEs to negotiate with creditors and maximise their chances of survival. In some cases, a Deed of Company Arrangement or a small business restructure could help your company avoid liquidation and continue operations.
Our Role in Your Business Recovery
Our firm is committed to supporting you through these challenging times. We offer:
- Expert advice on the SBRP and other restructuring options.
- Assistance with legal insolvency proceedings and compliance.
- Strategic financial management to improve business resilience.
How can Charles & Co. help you?
We encourage you to proactively engage with these considerations and reach out to us for personalized advice. Our Team with more than 50 years combined experience has helped numerous businesses and individuals in a range of challenging and distressed situations.