We were recently referred a group of companies by their solicitor. The companies traded a national retail business from nearly forty premises around Australia, as well as supplying to other larger unrelated retail stores.

The companies had various staff and various leases for premises. The group of companies had been making losses due to a slow decline in revenue over a period of years. This had resulted in, among other matters, the company that we were primarily engaged by, incurring an unpaid tax debt of over $1.1 million.

When the client was referred to us it was paying monthly instalments of $48,000 to the ATO to reduce its tax debt, however, this was impacting cashflow and the ability to take any steps to improve profitability or restructure the business.

Profit improvement strategies

With the help of the companies’ accountant, we came up with a strategy to:

  • Improve sales; and
  • Reduce costs, primarily by closing a small number of unprofitable stores and reducing costs at a warehouse/factory which the companies had.

However, the company was unable to implement part of the profit improvement strategy due to lack of funds available, this was partially attributable to the large amount being paid each month to the ATO.

Renegotiated payment arrangement

We then suggested to the directors that we approach the ATO to get them to reduce the monthly amount payable so as to free up funds to cover the costs of attending to necessary matters. On the directors’ instructions we put the following proposal to the ATO:

  • The company (which owed the tax debt) would pay monthly installments of $8,500 (instead of $48,000).
  • The company would attend to all future ongoing taxation lodgements and payment of the associated liabilities by their due dates.
  • The payment arrangement was to be reviewed in 12 months with a view to the company increasing the monthly instalment amount at that stage.

As part of our submissions to the ATO, we also set out difficulties which the companies had encountered along with strategies which were being put in place, so that the ATO could see that the directors were making all efforts to turn around the companies’ business and repay the debt to the ATO in full.

The ATO agreed to the amended payment arrangement proposed and the company (which owed the tax debt) has started making the lesser payments. The directors are also now able to start putting in place the strategies developed with sufficient cashflow available to meet the costs associated with this.

Contact us for Advice and Assistance

If you need to negotiate a payment arrangement with the ATO, or your business is having difficulties paying its tax debts, the professionals at TAX DEBT SOLVED can help with a free, no-obligation consultation, so contact us here.


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