Pearce & Heers is proud to provide the following advisory services:
We provide advice and assistance to company directors who have received Director Penalty Notices, either by assisting with the liquidation or administration of a company so that the director avoids liability, or through conducting negotiations with the ATO for a payment arrangement to pay the debt owed.Find out more >
We specialise in providing general advice and assistance to individuals with financial problems and directors of insolvent companies or companies facing financial difficulties.Find out more >
We assist companies and individuals settle debts which they owe or legal claims against them which they cannot pay. If successful, this results in a company avoiding liquidation or a avoiding bankruptcy.Find out more >
We can assist the directors of a solvent company wind up the company by way of a members’ voluntary liquidation in order to maximise the return to the company’s shareholders and/or in order to arrange for the ASIC to deregister the company.Find out more >
We have assisted numerous company directors negotiate payment arrangements with the ATO, including in circumstances where the ATO has initially refused further payment arrangements prior to our involvement or where the ATO has commenced legal proceedings to place the company in liquidation.Find out more >
We provide advice, guidance and assistance to company directors in respect of strategies which can be implemented to turnaround a company’s business so that it may trade profitably in the future.Find out more >
The ATO is able to recover a company’s unpaid PAYG Tax and superannuation from the company’s directors by issuing any or all of the directors with a Director Penalty Notice.
There are two types of Director Penalty Notice which the ATO can issue to a company’s directors in the following circumstances.
A company is generally required to:
If a company fails to pay PAYG Tax and superannuation, but it lodges its BAS within 3 months of due dates and SGC Statements when due, the ATO is able to issue a Director Penalty Notice to the company’s directors. The directors of the company can become liable to the ATO for the amount of PAYG Tax and/or superannuation claimed in the Director Penalty Notice. However, the directors can avoid personal liability under this type of notice if:
If a company fails to pay PAYG Tax and superannuation and it also fails to lodge its BAS within 3 months of them being due or its SGC Statements by the SGC Statement due dates, the directors are automatically personally liable for unpaid PAYG Tax and superannuation. In these circumstances:
In May 2019 new legislation was passed to change the date upon which company directors become automatically liable for SGC amounts. The new date is the date which SGC Statements are due which are:
If you become liable under a Director Penalty Notice then the ATO will treat your liability just as it would treat any ordinary tax debt payable. The ATO can and commonly will:
If a company has multiple directors, the ATO will often target its recovery action at the director or directors which it considers have the best ability to pay. The ATO will have certain information on a director’s personal financial position based on the director’s past Income Tax Returns.
The following tips will help directors avoid personal liability under Director Penalty Notices:
If you are liable under a Director Penalty Notice then:
The ATO is able to issue a Director Penalty Notice to a director who was a director at the time when unpaid PAYG Tax or superannuation was incurred, but who has subsequently resigned.
The ATO is also able to issue a Director Penalty Notice to an incoming new director after the director has been in office for more than 30 days.
A company’s director will have a defence to a claim by the ATO under a Director Penalty Notice if they are able to establish that:
• Due to illness or another acceptable reason, the director was not managing the company at the time the liability which gave rise to the Director Penalty Notice was incurred.
• They took all reasonable steps to meet its obligations to pay PAYG Tax or superannuation.
• They took all reasonable steps, where relevant, to wind the company up or appoint a voluntary administrator to the company.
• They took reasonable steps to ensure that the company complied with its obligations to pay superannuation. This defence may be available, for example, in circumstances where directors reasonably thought they were engaging a subcontractor, however, the subcontractor was subsequently deemed to be an employee to which superannuation provisions applied.
Given the serious effects the Director Penalty Notice regime may have on company directors’ personal financial positions, directors and their advisors should obtain appropriate advice and assistance when faced with the circumstances set out in this article.
At Pearce & Heers we commonly provide pre insolvency advice and other assistance to company directors and individuals facing financial difficulties. Some of the areas in which we specialise in providing advice and assistance are:-
Pearce & Heers specialises in providing advice and assistance to accountants regarding their client’s financial affairs. We are often contacted by accountants whose clients are in financial difficulty who either want to generally discuss their client’s circumstances and issues or who may wish to arrange a meeting with us where we can formally review an individual or company’s position and discuss the options which may be available.
We will generally have an initial discussion or consultation with an accountant at no cost to their client and will be up front with any costs which we may charge for any additional or specific work which we may perform for their client in the future.
If you are the director of a company or an individual facing financial difficulty Pearce & Heers can review your circumstances and advise on options available, including any risks which may arise, future strategies and possible formal or informal insolvency appointments.
We can then, if necessary, either provide further assistance in dealing with financial problems or, should it be your desired course of action, administer a personal or corporate insolvency appointment.
Pearce & Heers provides pre insolvency advice to directors of insolvency companies regarding the liquidation process, matters that a liquidator will attend to and any risks associated with placing a company in liquidation. In circumstances where we provide advice to a director which we consider excludes us from acting as liquidators of a company we will, if required, assist the director in arrange for another insolvency practitioner from a third party firm to be appointed.
Pearce & Heers also provides pre insolvency advice to individuals who wish to file for bankruptcy. We can then assist individuals file Debtor’s Petitions either appointing trustees from Pearce & Heers or appointing the Official Trustee from the Australian Financial Security Authority.
We commonly assist company directors or bankrupts deal with issues which may arise with a third party liquidator or trustee who has been appointed. This may include:-
We have advised numerous company directors who have received director penalty notices regarding the options available to them, including placing the company in administration or liquidation, entering into a payment arrangement with the ATO, or other options for Director Penalty liabilities which cannot be avoided. Find out more.
We are experienced in conducting negotiations with the ATO regarding payment arrangements for individuals and companies and we negotiate numerous payment arrangements with the ATO each year.
We are often engaged by a company, commonly via its accountant, to review the company’s circumstances and provide either general or formal advice on the company’s current solvency and risks to its ongoing solvency. In circumstances where we take on such an engagement we can also advise company directors in relation to future strategies which may be implemented to improve a company’s financial performance or deal with creditor claims which a company cannot immediately pay.
Pearce & Heers can provide general advice and assistance to companies or individuals who are subject to large claims by creditors which they cannot pay. This will generally involve us reviewing relevant circumstances and financial information and determining a strategy which may seeking to negotiate an informal settlement or payment arrangement or assisting an individual file for bankruptcy or a director place a company into liquidation.
In circumstances where a creditor has taken formal recovery action by issuing a company with a Statutory Demand and possibly subsequently a Winding up Application, Pearce & Heers can also provide assistance with reviewing a company’s financial position, considering risks to the company’s director and formulating a strategy to deal with the claim being pursued. Such a strategy may include seeking to negotiate a payment arrangement such that the creditor adjourns or withdraws the Winding up Application, appointing a voluntary administrator, or letting the company be wound up if there is limited or no prospect of the company continuing trading.
In some circumstances individuals or companies that are unable to pay all amounts which they owe to creditors may be able to negotiate debt settlements or arrangements with some or all of their creditors in order to avoid bankruptcy or liquidation.
Pearce & Heers specialises in assisting to negotiate these types of debt settlements and informal arrangements. The approach we commonly adopt is we provide creditors with a full summary of an individual’s or company’s financial position often with an estimate of the position should that party enter into a formal insolvency appointment, which assists creditors understand that a person or company cannot pay their debt in full. We will then generally make an offer of settlement to creditors on that person’s or company’s behalf and subsequently liaise with their creditors regarding the offer, any counter-offer received and if negotiations are successful in preparation of a settlement agreement.
When creditors understand an entity’s financial position and the prospects of recovery should that entity enter into a formal insolvency appointment, they may often be open to negotiating a settlement of their debt for a lower amount, reducing the interest on their debt for a period, or allowing deferred payment of their debt.
Informal arrangements can be proposed quickly and efficiently, however they require acceptance of the proposed settlement offer by each of a person’s or company’s creditors (or possibly the vast majority of creditors) to be successful. If one or more creditors reject a proposed offer the informal arrangement may not be able to proceed. Consequently, proposing such arrangements is more difficult as the number of creditors increases.
Additionally it is generally more likely for this process to be successful if a person or company is able to make an offer to creditors for a significant portion of their debts, although this may not always be necessary.
In considering whether to undertake this process, company directors and individuals must be aware that not all such informal matters will result in a successful outcome, however, it may be a better strategy than an immediate formal insolvency appointment.
If you would like to discuss the options available to you, including negotiating informal settlement arrangements, please contact us for an initial obligation free consultation.
We are often approached by individuals or companies that are subject to legal claims or proceedings, or those parties’ solicitors, in circumstances where the individual or company is unable to continue funding the litigation or meet the amount of any judgment which has been obtained or which may be obtained in the future.
Pearce & Heers specialises in assisting individuals and companies resolve litigation and disputes with a commercially-minded approach, which may often benefit both parties to the dispute. As with the negotiation of general informal arrangements with creditors, we commonly do this by providing the other side to a dispute with a summary of an entitles financial position, along with details of any estimated future costs to that entity of defending claims against it and a summary of estimated outcomes should the entity we are acting for be forced to make a formal insolvency appointment.
Whilst there is obviously no certainty of achieving a settlement through this process it provides a further option for parties who are subject to litigation to consider in circumstances where they cannot afford to continue to fund the litigation or meet the amount of any claim against them and it may result in settlement of disputes on commercial terms.
We have recently successfully assisted numerous individuals and companies enter into informal arrangements and settlements with their creditors, including in respect of the following matters:
The shareholders of a solvent company may decide to wind up the company by way of a members’ voluntary liquidation.
To commence a members’ voluntary liquidation, the majority of a company’s directors must resolve that the company will be solvent (that is able to pay its debts in full) within 12 months after the commencement of the liquidation. This resolution is commonly referred to as a declaration of solvency.
Once a company’s directors have made the declaration of solvency, the company’s members may wind up the company by way of a members’ voluntary liquidation by passing a special resolution at a meeting of members that the company be wound up in this manner. The company’s members must be given at least 21 days’ notice in writing of the meeting and for a special resolution to be passed at least 75% members entitled to vote and be present at the meeting must vote in favour of the resolution.
A special resolution can also be passed if all members sign a written resolution resolving that the company be wound up and if the is able to occur it avoids the necessity to convene and give notice of a meeting of members.
The winding up of the company will commence upon the making of the special resolution by members.
The role of the liquidator is to:
Winding up a solvent company through this process may have the following benefits to the company’s directors and shareholders:
A members’ voluntary liquidation will be finalised when the liquidator holds a final meeting of the company’s shareholders. The meeting is convened after all amounts owed to creditors (if any) have been paid and any surplus funds have been distributed to shareholders. The company is deregistered by the Australian Securities & Investments Commission three months after the final meeting is held.
Pearce & Heers has conducted many members’ voluntary liquidations and can provide advice and assistance to a company’s accountant, directors and members in carrying out the process. We generally provide this service for a fixed fee except in the most complicated matters.
If you wish to obtain advice regarding members’ voluntary liquidations, or appoint any of the qualified staff members of Pearce & Heers as liquidator of a members’ voluntary liquidation please contact our Brisbane or Gold Coast office.
For a significant number of companies, the ATO is their major creditor. Often for reasons outside the control of those companies’ directors a company is for a period of time unable to pay the full amount of its due and payable debt to the ATO. This can often result in serious consequences for the company, including the ATO:-
It is important for companies which fall behind in payment of their tax obligations to be proactive in their dealings with the ATO, as if discussions are not commenced with the ATO regarding the manner in which tax debts may be settled, the ATO is more likely to take the action set out above.
At Pearce & Heers we commonly assist company directors and their accountants review a company’s financial position including debts owed to the ATO, discussing risks associated with a company’s circumstances and formulating a manner in which to deal with the company’s problems. Often this may involve us making a proposal to the ATO on the company’s behalf for a payment arrangement which sometimes can involve the ATO agreeing to reduce interest and penalties which it has assessed.
Whilst we recommend that company directors are proactive in their dealings with the ATO, we also provide assistance and advice to directors who have significantly overdue tax debts and lodgement obligations including in circumstances where the ATO has already taken some form of recovery action.
We assist in negotiating numerous payment arrangements for companies with the ATO each year, however, some of the matters we have successfully dealt with in the past are as follows:-
Many business owners do not know the break-even point for their business and do not adequately focus on the key drivers of profitability. This is a significant opportunity for consulting work for accountants to assist directors with:
We provide advice, guidance and assistance to accountants and company directors in respect of strategies which can be implemented to turnaround a company’s business so that it may trade profitably in the future.
In some circumstances we may also be able to assist businesses in negotiating arrangements so that debts owed to creditors may be paid over time or coming to arrangements with creditors to compromise their debts. Such arrangements can assist a business with immediate cash flow problems by reducing or deferring current liabilities.
An insolvent company may agree to sell its business to another entity with the insolvent company to then be placed into liquidation at some point in the future. Such a sale may either be on the open market, if possible, or to a new entity, which may be related. If the sale is to a related entity then the sale ought to focus on a company’s core business / assets with a view to the new purchasing entity being in a position to trade profitably.
In any sale of a business or assets a company’s directors must comply with their duties, which include acting in the best interests of the company and all stakeholders. Where a company cannot pay its debts, directors’ duties also include having regard to and acting in the best interests of the creditors. To ensure compliance with a director’s duties, any sale of a company’s business and assets ought to be entered into for fair value and on commercial terms. This is particularly important in circumstances where a sale to a related entity will not enable all debts of the company to be paid and it is likely that the company will be placed in liquidation at some point in the future.
If a sale is not transacted for fair value and on commercial terms it may disadvantage creditors and give rise to breaches of director’s duties, recovery claims by a liquidator and offences being reported to the ASIC, which may subsequently prosecute directors. This conduct is commonly referred to as “illegal phoenix activity”, however, the ASIC recognises that there is a distinction between “legal” and “illegal” phoenix activity depending on whether the issues of value and commerciality are adequately addressed in the sale. Accordingly, proper legal and accounting advice ought to be obtained to ensure that sale arrangements are properly structured and do not give rise to “illegal phoenix activity”. In this regard there has recently been a significant growth in the number of “fringe advisers” who provide advice regarding financial difficulties but are not qualified insolvency practitioners and are unregulated. Certain of these advisers have been associated with “illegal phoenix activity” and this issue is under scrutiny from the ASIC and the ATO which are looking to pursue prosecutions in this area.
The benefits of a sale of business to a related entity may include the directors maintaining control of the business rather than an administrator or liquidator taking control, continuity of the business in the transmission to the purchaser and the directors have the opportunity to communicate and manage dealings with clients, employees, suppliers and financiers.
There are a number of issues to be addressed in a sale of a business including:
Our team looks at our client’s entire financial picture from an insolvency expert’s perspective to identify opportunities to resolve financial difficulties so formal liquidation or bankruptcy can be avoided.
After doing a detailed financial analysis and presenting all possible solutions, we factor in the client’s goals and financial needs to come up with the best course of action to try to minimise negative outcomes.
We understand financial difficulties are stressful. That’s why the Pearce & Heers team makes every effort to use their knowledge, experience and a positive approach to make the process as stress-free as possible.
While we do everything possible to help a client avoid liquidation or bankruptcy, sometimes that’s the most viable option. We are experts in administering formal insolvency appointments and ensure every detail is handled professionally and efficiently.
Because we focus on what’s best for our clients and offer a full range of advisory services few insolvency accountants offer, we’ve been able to get more favorable results for those who entrust us with their, or their client’s, financial challenges.
We care about our clients’ circumstances and results, we always act honestly and with integrity and we will always tell things as they are even if it is not what a client wants to hear.
Our goal is to minimise the impact of insolvency and to make the process as easy as possible for our clients. We are always professional, discreet, efficient and handle every situation with the utmost respect for our clients and those with whom they do business.
We assist with everything from creating and implementing business turnaround strategies to administering formal insolvency appointments. We’re happy to offer a free initial consultation so you can discover what’s possible.