Barretts Bakery goes into administration owing $2m to ATO

A popular chain of bakeries is at risk of going under, as the tax office claims the business owes $2m in debt.

A popular bakery chain has collapsed owing $2m, with administrators urgently trying to find a solution to save the business.

The West Australian business, Barretts Bakery, owes the Australian Taxation Office $2m.

Administrators were given control of the string of bakeries, which first opened in Perth in 1998, on July 27, according to a notice published on the ASIC website.

Barretts Bakery owes the tax office $2m. Picture: Supplied

Mervyn Kitay, the principal of the insolvency firm Worrells, was set to hold an initial meeting on Tuesday in an effort to find a solution to save the struggling business.

If the administrator is unable to come to a workable outcome, the bakeries will likely be sold or liquidated.

Mr Kitay told 7 News said the business’s struggles during the Covid pandemic led to the mounting $2 million legacy debt.

A legacy debt refers to debt that is above what could have been expected in relation to GDP and inflation behaviour.

The ATO has provided general advice that if legacy debt is not paid, the company director becomes liable.

“As a company director you are responsible for ensuring that the company’s tax and super obligations are reported and paid on time,” the advice states.

The bakery is popular among Perth locals. Picture: Supplied

“If your company does not pay certain liabilities by the due date, we can recover these amounts from you personally as a current or former company director.”

Mr Kitay said increasing the director penalty notice can be a “powerful weapon” to force repayment.

The ATO issued more than 17,000 penalty notices during 2022-23, which included thousands of legacy debts being recalled by the government in a bid to target non-compliant companies.

Mr Kitay said senior management could become personally liable for tax and super obligations if the debt was unpaid.

The bakery has seven stores across the city, including in the Perth CBD, Claremont Quarter, Victoria Park and Mount Hawthorn.

Mr Kitay has been contacted for comment.

Originally published as Barretts Bakery goes into administration owing $2m to ATO