Insolvencies to rise with taxman set to apply big stick after election

The ATO is set to ramp up its debt collection after the federal election forcing more Qld companies to the wall amid rising costs and supply chain issues. See list of failed companies.

The number of Queensland companies going into liquidation or administration in April fell to 60, from 71 in March.

The Australian Taxation Office is set to ramp up debt collection after the federal election forcing more companies to the wall.

Insolvencies remain at approximately half of pre-COVID levels but rising cost and supply chain issues across the economy is set to prompt a new wave of collapses.

ASIC records show liquidators or voluntary administrators were appointed to 60 Queensland-based companies in April, down from 71 in March but up from 54 in February.

Gold Coast-based T.A.T Floor and Wall Tiling Qld collapsed owing $1.4m to creditors while Burleigh-based Q Build Formwork went under owing about $1m.

Revive Financial director Jarvis Archer said the Australian Taxation Office had recently toughened its approach to debts and was now seeking maximum payment arrangement terms of two years instead of three.

“Interest free payment arrangements are no longer available, and ATO officers are now asking about capacity to pay,” said Mr Archer.

“The next stage is to recommence more serious enforcement activity which we really haven’t seen since prior to March 2020. Many have been predicting this will occur following the upcoming federal election.”

Leniency in relation to tax debt collection was a key pillar of the Federal Government’s Covid-19 relief package. As a result, the ATO’s total collectable debt has risen approximately 53 per cent from $26.2 billion at 30 June 2019 to $39.9 billion at 31 December 2021.

Mr Archer said there had been recent reports of builders seeking increased payments from customers to pass-on higher costs despite fixed price contracts.

“There is unlikely to be any legal basis for such claims and this therefore appears to be a last-ditch attempt to avoid an insolvency,” said Mr Archer.

The reinvigorated efforts to collect outstanding tax debts has led to greater interest in the Federal Government’s new small business restructuring process (SBRP).

The SBRP process was introduced last year to allow smaller companies to reduce their Covid-19 debts, including the ATO. The key benefits of an SBRP compared to voluntary administration are lower costs, risks and external intervention.

To be eligible for an SBRP a company must have its ATO returns all lodged, super and other employee entitlements paid in full, and creditors of less than $1 million.

Only 57 SBRP appointments have been undertaken, and 31 have been successfully accepted, since their introduction in January 2021.

“However, with so many businesses now having to deal with their accrued ATO debts, we‘re looking forward to these becoming more popular to rescue businesses in the coming months,” said Mr Archer.