Quick Snapshot
- Industry: Hospitality (Café), Victoria
- Total Debt: $450K (ATO plus minor creditors)
- Strategy: Small Business Restructuring (SBR)
- Outcome: 75% of ATO debt resolved, business continued
The café was busy again. Tables full, staff back on, revenue steady.
But $450,000 in ATO debt from the COVID years sat behind it all, too large to ever trade its way out of.
The Situation
A Victorian café had recovered well after COVID. Trade was consistent and cash flow was manageable. The problem was a $450,000 ATO debt built up during the pandemic. At café margins, the business could never realistically repay that from day-to-day earnings. Smaller creditors were owed money too, but the ATO held most of the debt.
The Problem
- $450,000 in ATO debt, far more than the business could repay from trading
- The ATO held the majority, with minor creditors alongside
- A standard ATO payment plan was unworkable at café operating margins
- The business was viable, so liquidation would have destroyed a healthy operation
The Solution
de Jonge Read® identified a Small Business Restructuring (SBR): a formal process that lets a viable business propose a repayment plan to its creditors while continuing to trade, without going into liquidation.
Two things made the café a strong fit. The director had a clean compliance history and no outstanding director loan, the factors that most often complicate an SBR.
This involved:
- Confirming the business was viable and eligible for an SBR
- Putting a plan to creditors offering 25 cents for every dollar owed
- Securing approval from the ATO as the main creditor, and from the smaller creditors
- Structuring the agreed amount over 18 months with no interest or fees
The Outcome
- $337,500 of ATO debt resolved through the plan, 75% of the total
- $112,500 repaid over 18 months, interest and fee-free
- The café continued trading, with all operations and staff preserved
- The director was freed from ATO enforcement action
- A fixed, predictable repayment the business could comfortably meet
Key Lesson
A viable business carrying a debt it can never outgrow has a structural problem, not a cash flow one. With a clean compliance record and no director loan, a restructure is often simpler than business owners expect.
If you are running a viable business weighed down by ATO debt you cannot trade your way out of, a no-cost conversation with de Jonge Read® can clarify where you stand and what options remain. Call 1300 765 080.
This Small Business Restructure helped a Victorian café resolve $450,000 in COVID-era ATO debt, repaying 25 cents in the dollar over 18 months while continuing to trade and protecting the director from ATO enforcement action.
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.
