Quick Snapshot
- Industry: Construction (Painting & Maintenance)
- Location: Melbourne, Victoria
- Total Debt: $555K (ATO) + $66K DPN
- Outcome: 100% ATO debt cleared, DPN exposure addressed, business continued
The Situation
A Melbourne-based painting and maintenance business operating in the residential construction market approached de Jonge Read® after a sudden financial shock.
The business had been performing well, with consistent work and strong cash flow, until its largest client went into liquidation, leaving a significant unpaid contract.
This immediately impacted cash flow and disrupted the stability of the business.
The Problem
Following the loss of the major client:
- The business fell behind with the ATO, accumulating $555,000 in tax debt
- A $66,000 Director Penalty Notice (DPN) was issued
- Cash flow pressure increased as the director continued to meet employee wages and entitlements
Despite the financial pressure, the underlying business remained viable, and the director was committed to continuing operations.
The Solution: de Jonge Read®’s Expertise
We implemented a Pre-Pack restructure (sale of business to a related entity at market value).
This involved:
- Transferring the business, including goodwill, plant, and equipment, into a new entity
- Preserving the viable operations of the business
- Placing the original company into liquidation to deal with outstanding liabilities
We also guided the director through the steps required to:
- Address Director Penalty Notice (DPN) exposure
- Manage any potential insolvent trading risks
The Outcome
The restructure enabled the business to continue operating while resolving legacy liabilities.
Key results:
- $555,000 in ATO debt cleared (100%)
- Director Penalty Notice (DPN) exposure addressed
- Business operations preserved through a new entity
- Personal position protected
The director was able to continue trading with improved cash flow and a more sustainable structure.
Key Lesson
When a viable business is impacted by a one-off event, such as the collapse of a major client, a structured solution can preserve operations and address accumulated liabilities.
A Pre-Pack restructure can provide a pathway to continue trading while dealing with historical debt and personal exposure.
If you are dealing with ATO debt, DPN exposure, or a sudden loss of revenue, the team at de Jonge Read® offers confidential, no-cost initial advice to help you understand your options before the situation escalates.
This case highlights how construction businesses in Melbourne facing ATO debt and DPN exposure can use a Pre-Pack restructure to clear liabilities and continue trading.
Should you have clients or associates that you know are struggling with financial issues or need assistance in reviewing their business affairs in preparation for what’s around the corner, our team of Strategists would be pleased to discuss options that are available on how to best design and implement insolvency strategies. Contact us now on p. 1300 765 080 | ua.mo1777389592c.arj1777389592d@ofn1777389592i1777389592
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
