COAST’S $1.6 BILLION TAX BOMB

City firms warned time running out to catch up on pandemic bills

GOLD Coast businesses owe a whopping $1.6bn in tax debt, expected to soar when the Australian Taxation Office (ATO) reports updated figures this financial year.

Struggling small-tomedium size enterprises could enter company tax payment plans with the ATO during COVID-19 but experts are now warning “crunch time” is coming.

GOLD Coast businesses owe a whopping $1.6bn in tax debt with that number expected to soar when the Australian Taxation Office (ATO) reports updated figures for this financial year.

Struggling small-to-medium size enterprises have been able to enter company tax payment plans with the ATO during COVID-19 when some sectors, particularly hospitality and tourism, have faced a significant downturn in trade.

Insolvency expert Glenn O’Kearney, of Bundall-based GT Advisory & Consulting, said businesses were entering a “crunch time” where company tax was due amid “snowballing debt”.

The federal government had outlined a number of insolvency reforms, including small business restructuring (SBR) and simplified liquidation (SCVL), he said, however he added that take-up rates had been slow.

“Last year one of the relief mechanisms was the ATO allowed people to reduce their instalments if they believed their revenue was going to drop,” Mr O’Kearney said.

“I suspect a lot of people would have taken that up.”

He said for some companies they would be faced with company tax due this month (May 15), payments that had been deferred from 2019, and payments due next May as well.

“So it’s just this snowballing effect if you have not kept up with payments,” he said. “Those industries focused on international tourism, particularly on the Gold Coast, and those that rely on international students … if they were carrying some tax debt already they are going to find it very difficult given their cash flow won’t be there.”

Mr O’Kearney said much depended on the approach taken by the ATO, which to date had made limited use of statutory demands and director penalty notices.

He said the ATO was the biggest driver of companies seeking insolvency through tools such as statutory demands.

“The accountants are saying warning letters are escalating. The red letters are coming,” he said. “They (the ATO) haven’t released a statement … saying they will start turning the statutory demand machine on but I am aware there has been directors’ penalty notices issued.”

Mr O’Kearney said the notices say that “if you don’t do something in the next 21 days (about tax debt) you’re going to be personally liable”.

He said SBR and SCVL were not being taken up at significant rates so far.

One issue was the eligibility requirements for things such as tax to be paid up to date, which often wasn’t the case for businesses in trouble.

“The eligibility is a bit tricky. You have to be under $1m and that includes related party debt,” he said.

“Generally (businesses struggling) are doing everything they can to avoid insolvency … they are not generally bringing their returns up to date.”

Southport Chamber of Commerce president Ian Kennedy said the tax issue was “coming to a head”.

“Some companies have entered into payment arrangements but you can only have one in place at a time,” he said.

“So they are having to juggle making sure other payment arrangements are completed before they can enter one for company tax.

“It is definitely coming to a head … and I know accountants are scrambling around and getting extensions,” Mr Kennedy said.