The small business restructuring scheme was introduced during the COVID-19 pandemic to streamline business debt restructuring and reduce costs. It has been 18 months since it became operational, and many struggling businesses have opted to take advantage of the scheme.

Pearce & Heers have over the years assisted with business turnaround. A large number of these businesses have had significant tax debts.  And recently we have seen businesses with significant tax debts as a result of the COVID-19 pandemic.  These businesses are otherwise profitable.

The ATO is often a major creditor of businesses considering small business restructuring, and their support is crucial in ensuring a successful restructure.  The ATO has indicated that it will continue to support viable businesses that experienced temporary setbacks due to unforeseen circumstances, not unlike those that have been seen in the past two years.  This includes through supporting viable small business restructuring appointments.

Benefits

There are several reasons why a struggling business should consider taking advantage of small business restructuring.  These include:

• It can provide a better outcome to all stakeholders;

• It allows a business to continue trading while dealing with historical debts which have accrued.  This is through the directors retaining control of the company while the restructuring process is ongoing;

• It is a simpler and more costs effective solutions for small businesses as compared to, for example, a voluntary administration;

• It allows the business to engage with and seek the support of the ATO;

• It provides for protection to directors from insolvent trading claims and possibly director penalty risks; and

• It provides businesses with an opportunity to seek resolution with creditors at the first sign of financial distress.

In regards to the ATO, it has indicated that it will support viable businesses that experienced temporary setbacks due to unforeseen circumstances including through supporting viable small business restructuring appointments.  However, the ATO has also made it clear that in assessing any proposal for small business restructuring it wants to see proper financial information for a business, some information regarding what the outcome in liquidation will be and if amounts are to be paid through small business restructuring over time information about a businesses’ financial capacity to make payments.

Eligibility

To take advantage of the scheme however, businesses must fall within the eligibility criteria, that is:

• All taxation lodgments must be up to date;

• Total debts or liabilities must not be more than $1,000,000; and

• All employee entitlement payments such as superannuation must be up to date.

Contact us for assistance

If your business has unmanaged debts but is otherwise profitable, contact us at our Brisbane or Gold Coast offices for a free no-obligation consultation. Our team is led by members of the Australian Restructuring Insolvency and Turnaround Association (ARITA) who are also small Liquidators who can act as small business restructuring practitioners. We are well equipped to provide you with the necessary advice to ensure you, as a director, are well protected.