Insolvency Australia is reminding small-business owners ahead of the end of the current financial year to maintain their tax compliance, amidst an intensified campaign by the ATO to collect tax debts.
“The ATO is hellbent on collecting what it’s owed and is really doubling down on compliance,” Gareth Gammon, Insolvency Australia (IA) Director, said. “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,” Gammon added. “Last month there were record-high insolvencies, tracking more than 50 per cent above pre-pandemic levels. That’s why EOFY 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.”
Insolvency Australia member Josh Taylor, Managing Director of Taylor Insolvency, pointed out that the ATO is being far more aggressive in its debt collection.
“It [the ATO] is now issuing even more DPNs, both before and after liquidations,” Taylor said. “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.”
IA member Chris Baskerville, a partner with Jirsch Sutherland, recommended that small businesses report their tax obligations on their own even if they are unable to pay for them.
“That means 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,” Baskerville 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 has suggested that small-business owners prepare for the new financial year by creating a 12-month cashflow forecast to determine what their business will look like for the next year.
“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,” Baskerville said.
Baskerville also suggested that small-business owners take a look at Small Business Restructuring (SBR) plans, pointing out that there has been a 400 per cent increase in SBRs in the last year alone, and that SBRs can save businesses $700,000 to $800,000 in debts.
