It’s BAS time – and retail business owners and directors are being urged to seek help immediately if they’re struggling to pay their tax because of pandemic-driven cash flow issues.
Speaking up now could ensure retail owners have more options to save their business or restructure, says national business rescue and insolvency firm Jirsch Sutherland.
“If you’re behind in your tax payments, it’s crucial to act quickly,” says Andrew Spring, Jirsch Sutherland Partner.
“While the ATO has been sympathetic about uncertain cash flows and made some changes to its normal practices – eg, it suspended its normal collection strategy around April 2020 – this generosity won’t last forever.”
Mr Spring says that if a retail business owner is in financial distress, it’s best to speak with a trusted adviser quickly.
“There may be fewer options available if you wait. A tax debt of $100,000 or more is a deep hole for most business owners to climb out of without assistance.”
Business rescue solutions
Spring says Australia has some of the most advantageous business rescue legislation in the world, being both quick and commercially focused. Options include:
- Payment plans: “These can be a useful tool to manage short-term illiquidity, but more decisive options should also be considered for businesses that have been severely affected and are carrying significant debt (including ATO debt) on their balance sheets,” Mr Spring says. “This is even more relevant today, due to the continuing uncertainty surrounding economic conditions and business forecasts.”
- Voluntary Administration: “This regime is Australia’s business rescue program. It provides an opportunity to not only defer payment, but also compromise the amount of the payment to a level that the business can afford.”
- The new Small Business Restructuring Process (SBRP), developed in response to the pandemic: “It’s added another option to financially restructure and save a distressed business. Not only can you defer payment, but you can also negotiate the amount of the payment,” Mr Spring adds.
Covid challenges cash flow
Covid-19 lockdowns and restrictions are causing many retail businesses across the country to struggle, and rising tax debts serve as a reminder to seek help.
The ATO debt attributed to small to medium enterprises was $21.4 billion at FY20.
“This reinforces that a significant number of SMEs have been majorly impacted by the Covid-19 disruptions,” says Mr Spring. “And the trend of rising tax debt is expected to continue as the pandemic persists.”
He assures retailers that talking to a business recovery specialist doesn’t mean it’s the end of the line. In fact, both Voluntary Administration and the SBRP provide an opportunity for the total liability of a company to be reduced and deferred.
“It can be an effective way to solve your business’s financial problems,” he says.