Quick Snapshot
- Industry: IT Consulting, Victoria
- Total Debt: $750K company ATO + $900K personal ATO
- Strategy: Pre-Pack Restructure and Bankruptcy
- Outcome: $1.65M ATO debt resolved, business trading
The tax problems had built up on both sides at once. The company owed the ATO $750,000. The director carried a further $900,000 in his own name.
The Situation
This was company and personal ATO debt running in parallel. A Victorian IT consulting business had been poorly managed for years, with BAS and tax returns left unlodged. Company ATO debt reached $750,000 while the business still held cash, and the same compliance gaps left the director personally exposed.
The Problem
- $750,000 in company ATO debt with enforcement action looming
- A separate $900,000 personal ATO debt in the director’s own name
- The business held cash that could be caught before it was distributed properly
- Years of unlodged returns had closed off several standard recovery options
The Solution
de Jonge Read® built a two-part strategy: one for the company, and one for the director personally.
For the company, a pre-pack restructure was used. This is a process where a new entity takes over the viable parts of a business so it can keep trading, while the old company goes through a wind up and its debts are resolved through liquidation. A Small Business Restructure, a formal repayment plan with creditors, was ruled out because years of unlodged returns made ATO approval unlikely.
This involved:
- A new entity acquiring the business so trading could continue, with the director’s loan account addressed
- The original company placed into liquidation to resolve the ATO debt
- For the director, bankruptcy as the only path that fully cleared the $900,000 personal liability, after a Part IX debt agreement and a Part X personal insolvency agreement were both ruled out
The Outcome
- $1.65 million in total ATO debt resolved across the company and the director
- The viable business transferred to a new entity and now trading profitably
- The director clear of the $900,000 personal liability
- The director now employed in the business on a salary, free of personal exposure
- A complete fresh start for both the business and the individual
Key Lesson
When tax problems build up on the company and the director at the same time, they compound quickly. Acting while the business still had something worth protecting was what made a full recovery possible.
If you are facing ATO enforcement on both your company and your personal tax position, a no-cost conversation with de Jonge Read® can clarify where you stand and what options remain. Call 1300 765 080.
This two-part strategy helped a Victorian IT consulting director resolve $1.65 million in company and personal ATO debt through a pre-pack restructure and bankruptcy, while keeping the business trading and securing a clean fresh start.
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.moc.arjd@ofni
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
