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The ATO will accelerate its mail-out of director penalty notices in an attempt to reduce the huge amount owed by small businesses.
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Debt crusade means more DPNs on the way, says BDO
19 October 2022
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The ATO will target more businesses with director penalty notices as its debt reduction regime shifts up a gear, says a business restructuring specialist.
BDO Australia partner Jeff Marsden said the tax office was on a post-pandemic mission to collect revenue and its patience was running out.
“The issuing of DPNs has really been ramped up by the ATO,” he told Accountants Daily ahead of its upcoming Strategy Day 2022 in November.
“It’s reached a point now where the ATO is holding the view after the change of government that they have given enough support to businesses. Now it’s up to businesses to stand on their own two feet and start to pay their accrued tax debt.
“It needs to be collecting revenue for the government, and it cannot continue to allow its debt book to escalate out of control any further.”
He said the ATO had resumed its debt collection by targeting the tougher cases that had failed to enter talks about payment arrangements or settling debts.
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“Moving forward, I think the ATO will start to look at where they’ve got exposure to businesses and will be looking to reach reasonable agreements for the repayment of those debts,” he said.
Accountants needed to warn their business clients that early intervention was critical to prevent a DPN in the first place. They should monitor clients for any signs of business distress, and speak to their key stakeholders, lenders, the ATO, their landlords, major suppliers, and customers to ensure they were aware of any issues.
“It’s important for business owners to assess their current position and for accountants to alert them to the various options at their disposal,” Mr Marsden said.
“This could include an informal turnaround strategy where business owners get key stakeholder buy-in.
“If, however, it’s at the point where there are concerns around insolvency, it may require a safe harbour process to allow the directors to run the process. “Alternatively, the business owner may need to look at small business restructuring and administration to get through the financial difficulty.”
A turnaround plan could involve examining the key issues facing the business, looking at options and strategies for remedies, and securing buy-in from stakeholders.
“Typical things we would see in a turnaround plan are negotiating payment arrangements with key creditors, looking at whether there are underperforming areas of the business that can be divested or wound down, looking at right-sizing the business for the current market, or a distressed merger and acquisition.”
Accountants could also provide asset-protection strategies, particularly for small business owners who invested their personal assets (such as their home) and drew down on their mortgage to bolster their business.
In these instances, a robust structure and strategy was essential to avoid any adverse impacts on the business owners, he said. Accountants should urge businesses to consider how their funds are used in their business.
“Accountants must also make sure that when their SME clients establish their businesses, it is done so with proper structures in place to protect directors,” he said.
“They also want to make sure that business owners’ investments are structured carefully so that if something happens and it’s not the business owner’s fault, they are not adversely impacting their wealth.”
During his session at the Accountants Daily Strategy Day 2022, Mr Marsden will provide tips on how accountants could help their business clients weather the storm amid supply chain disruption, high inflation, rising interest rates, and labour shortages.
The Strategy Day will take place on 29 November at Grand Hyatt, Melbourne, and 1 December at Parkroyal, Parramatta in Sydney.
Click here to book your tickets now and don’t miss out!
For more information, including agenda and speakers, click here.
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