Has your company got a tax debt it can’t pay? If so, you can ask the ATO for a payment arrangement. And as part of a payment arrangement the ATO may agree to reduce interest and penalties owed by a company.
But the ATO will virtually never agree to reduce a company’s core tax debt. That is unless an insolvency process is used, such as small business restructuring.
What is small business restructuring
Small business restructuring is a process available to companies with less than $1 million in total net debt. To be eligible companies must have also paid all outstanding employee entitlements including superannuation and have their tax lodgements up to date
If your company is eligible it can engage a registered liquidator (such as TaxDebtSolved) to act as a small business restructuring practitioner. With the help of the small business restructuring practitioner you will formulate an offer to creditors to settle your company’s debts. This proposal will include funds being made available to pay creditors a lesser amount than what they are owed. For example, if your company owes $400,000 to creditors you may “offer” creditors a total of $200,000 or 50 cents in the dollar.
Once the proposal is finalised the small business restructuring practitioner sends the proposal to creditors and creditors vote whether or not to accept the proposal. Creditors vote on the plan and the plan will be approved if a majority, in value, of unrelated creditors vote for it. If the proposal is accepted it is binding on all creditors.
How can small business restructuring help settle tax debts?
Small business restructuring can help businesses with unmanageable tax debts compromise those debts for a lesser amount. This is because the process will help businesses actually reduce their core tax debts and continue trading. Obviously for this to occur creditors, including the ATO, have to be happy with the small business restructuring proposal presented to them. And this is where we can help, we can assist in formulating a proposal and acting as small business restructuring practitioners.
Contact us for help
If your company can’t pay its tax debts, then you should urgently get professional advice. So, please contact us today for a free, no-obligation consultation.