We have written about the then proposed small business restructuring scheme here. The new small business restructuring laws came into effect on 1st January this year.
The scheme will be beneficial for companies with unmanageable tax debts. Tax debts cannot be compromised other than the reduction of interest and penalties imposed. Small business restructuring however, provides a way for companies to compromise tax debts which they otherwise would not have been able to do. The linked article above provides an example of how this would work.
In this article, we discuss the issues that you, as a director, should be aware of when considering whether to the new scheme is suitable for your business.
Tax lodgements
A company cannot utilise small business restructuring if it has any material overdue tax lodgements. We often come across struggling businesses who have not been up to date with their tax lodgements for a significant period of time. This can pose a problem for smaller businesses as it can be quite costly to have their tax lodgements up to date, especially within a short period of time.
Employee entitlements must have been paid
The other issue that we come across for many businesses is that employee entitlements have not been paid up to date, particularly superannuation payments. To be eligible for small business restructuring, a company cannot have overdue employee entitlements. As one can expect, many struggling businesses may have had difficulty in paying their employee entitlements and may owe overdue superannuation. In those circumstances a business will not be able to use small business restructuring.
Director penalty notices
Importantly, the rules relating to “lockdown” director penalty notices (“DPN”) will still apply, despite having appointed a Small Business Restructuring Practitioner under the small business restructuring scheme. A lockdown DPN can be issued by the ATO if your company has not lodged the required tax lodgements within timeframes specified.
If you have been issued with a lockdown DPN or a 21-day DPN which has expired, you will continue to be liable for the tax debt. Further, the ATO can still issue a lockdown DPN after your business has been successfully restructured under the SBR Scheme.
More information on DPNs can be found here.
Contact Us For Assistance
If you are considering small business restructuring, we can help assess your situation and advise you whether it is suitable for your circumstances. We can also provide you solutions to deal with any personal liability that may arise during the process.
Our team is led by registered liquidators and are senior members of the Australian Restructuring Insolvency and Turnaround Association (ARITA). Contact us at TAX DEBT SOLVED for a free, no-obligation consultation.
