Over 750,000 businesses have taken advantage of the Federal Government’s JobKeeper scheme. This has allowed these businesses to continue trading, in many cases where they would have otherwise have had to close. But what will happen to these businesses when JobKeeper ends in September 2020? What can they do to deal with outstanding tax debts which have arisen prior to or during the coronavirus pandemic period?
Tax Debt Solved is here to help your business when JobKeeper ends. So give us a call and we can help you implement one of the following solutions:
Negotiate an ATO Payment Arrangement
The first thing a business should do is to look at negotiating and making a payment arrangement with the ATO. In times such as the current pandemic, the ATO is open to having proposals being made for long term payment arrangements. A business can also propose that the first payment of a payment arrangement be made in a few months’ time. This will offer breathing space to the company and allow it to get back on its feet.
Voluntary Administration to Avoid Liquidation
Voluntary administration is a process used to save a business in financial difficulty. The main objective of a voluntary administration is to avoid the company being put into liquidation. The voluntary administrator will report to creditors on the company’s affairs and any proposal the directors have put forward to settle creditors’ claims. The voluntary administrator also holds a meeting of creditors where creditors vote on the options available, being:
- Ending the voluntary administration and allowing the directors to resume control of the business; or
- Accepting the directors’ proposal to settle creditors’ claims which is done via a Deed of Company Arrangement (DOCA); or
- Placing the company into liquidation.
If a proposal for a DOCA is agreed to then the company can continue trading and it avoids liquidation.
Business Sale Arrangement via Legal Phoenix Transaction
A ‘phoenix transaction’ involves the sale or transfer of assets from an insolvent company to another, often related company. This allows the owner(s) of the business to start over with the new company, leaving behind old debts, including tax debts.
It is crucial however, that the transaction is done in compliance with the relevant laws. Many business owners or directors have arranged a phoenix transaction which is later deemed illegal by a future Liquidator or the ASIC. One such example is set out here. If a phoenix transaction is deemed illegal, there can be various consequences for a company director including possible criminal prosecution.
To avoid a business sale being deemed an illegal phoenix transaction, expert advice should be sought before attempting any transfer of assets involving a business in distress.
The purpose of a liquidation is to wind up the affairs of a company. This should be the last resort. In some cases however, it is simply not viable to save a business or company and liquidation is the only viable solution.
Once appointed, a liquidator will realise any available assets of a company, investigate and pursue any viable recovery action and distribute any surplus funds available to the company’s creditors.
More information about liquidation can be found here.
Contact us for Assistance
If believe that your company will have difficulties in paying its debts when JobKeeper ends, then you should urgently get professional advice. We at TAX DEBT SOLVED can help. So, in these circumstances please contact us for a free, no-obligation consultation, contact us here.