The laws came into effect from 1 January 2021. This is how they can help your business solve its debt (including tax debt) problems.
Simplified Way to Settle a Company’s Debts
The directors engage a registered liquidator to assist in preparing their proposal to settle debts, which is called a restructuring plan. After this is progressed, the company officially appoints a registered liquidator as a small business restructuring practitioner (SBRP).
The SBRP then notifies creditors of the company of the appointment and within 20 business days puts the directors’ proposal to settle debts to creditors. Creditors then vote on the proposal and if it is accepted by a majority in value of unrelated creditors who vote, it is passed and is binding on all creditors.
The directors continue to retain control of the company and are allowed to continue trading throughout the process. The SBRP has virtually no role in the company’s business.
Eligibility for Small Business Restructuring
For a company to use small business restructuring it must have:
- Debts of less than $1 million including debts to related entities;
- Paid all employee entitlements which are due including superannuation; and
- No overdue taxation lodgements (although not all tax has to be paid).
How This Will Help with ATO Debts
The small business restructuring processes will help business compromise tax debts. The ATO will in nearly all cases not compromise debts other than agreeing to reduce interest and penalties imposed outside of a formal insolvency appointment.
An example of how the small business restructuring process may work for a company with a large tax debt is set out below:
Other Debts $50,000
The directors of the above company could (for example) put up $100,000 to settle the company’s debts and pay costs involved with the process. If this proposal is accepted, then the company will be able to continue trading and all debts will be compromised.
Contact Us For Assistance
Our team, which is led by registered liquidators and are senior members of the Australian Restructuring Insolvency and Turnaround Association (ARITA), will be able to assist you in recalibrating your business. So, if you think your business may be insolvent and you are looking at restructuring it, contact us at TAX DEBT SOLVED for a free, no-obligation consultation.