This article was written by Jimmy Chong, Accountant at Tax Debt Solved.
A client recently approached us after having been served with a statutory demand by the ATO. A statutory demand is issued prior to the ATO going to Court to place a company in liquidation. The demand was for a $118,000 tax debt which included:
- PAYG, GST, penalties and general interest charges of slightly less than $74,000; and
- Superannuation Guarantee Charges and the related interest of approximately $44,000.
The client was a property management company managing over 150 properties across Brisbane. Several factors had contributed to the financial difficulties of the company, including a challenging real estate market in Brisbane.
When we were approached, steps had already been taken by the directors of the company to turnaround the business, including:
- Reducing the number of staff it employed;
- Relocating its office from the CBD to an area with less expensive office space; and
- Selling a portion of the company’s rent roll to raise funds in order to reduce debt.
The steps taken by the directors had provided some improvement to the company’s business but it still had to deal with its large tax debt.
As the amount of tax debt was significant and the business was heavily impacted by the slowdown of the real estate market, the options available to the client were as follows:
- Allowing the ATO to apply to Court to place the company in liquidation or voluntarily placing the company in liquidation;
- Appointing a Voluntary Administrator for the purposes of putting forward a proposal for a Deed of Company Arrangement; or
- Negotiating a payment arrangement with the ATO
Our clients decided they wanted to engage us to negotiate a payment arrangement with the ATO. As the tax debt had been referred to the ATO’s legal department we contacted them and put forward our client’s proposal. After some further discussion and us providing further required information, the ATO agreed to a payment arrangement which involved payment of small instalments for 9 months, and a lump sum to the ATO in 10 months’ time. By negotiating this payment arrangement we gave the company time to further turnaround the business and/or source funds for the required payment(s) to the ATO. It also meant that the company avoided liquidation and its consequences.
Contact Us For Assistance
If you have a tax debt and you would like to consider all options which may be available to you, please contact us for a free, no-obligation consultation.