Tax office gets tough on debts
Pandemic light touch is over
INSOLVENCY practitioners are warning business owners with outstanding tax debts to get their houses in order before an expected ramping up of enforcement action early in the new year.
While the number of companies being wound up or entering external administration has been low throughout the pandemic, due in large part to a light touch approach from the Australian Taxation Office, figures for November indicate the tide could be turning.
Insolvency practitioners have been awaiting action from the ATO, which paused its debt collection activities during the onset of Covid-19 in early 2020, to avoid penalising businesses dealing with temporary lockdowns and enforced trading restrictions.
But last month the tax office circulated a statement confirming debt recovery activities would recommence in NSW, Victoria and ACT.
Figures compiled by News Corp Australia show that the number of companies entering administration in November jumped 32 per cent on the previous month, to 341, with NSW leading the pack with 132, followed by Victoria 95, Queensland 58, Western Australia 28, South Australia 17 and Tasmania 1.
High profile construction group failures dominated the headlines in three states, with Queensland’s Privium Group and Victoria’s ABD Group both failing with debts estimated to be about $80m.
In NSW, high-end interior fit-out company Cubic, which has been involved with projects such as Barangaroo and the Ritz Carlton, went into liquidation, but a debt figure has yet to be disclosed in that case.
Construction firms have been over-represented nationally in the insolvency figures, and while that is not unusual historically, large cost increases for inputs are making it increasingly difficult for some builders to turn a profit.
Revive Financial head of business restructuring and insolvency Jarvis Archer said there was speculation that a number of other major construction companies were in financial difficulty and the ATO appeared to be ramping up its debt recovery efforts.
“They’ve also rolled back a blanket hold on interest charges, recommencing charging interest on debts from early December,” he said.
Historically, from early December, banks and the ATO place a moratorium on recovery action, only recommencing in January.
“The light touch approach from the ATO is expected to cease in the new year, and recovery action will return to normal,” Mr Archer said.
SV Partners director Alan Scott said there had been an increase in insolvency inquiries from company directors and creditors.
“We’ve noticed an upswing in the last three weeks,” he said.