You did everything you were told to do. The old company was struggling, so you closed it and started fresh. New company. Clean slate.
Then a bill arrives. It is for the old company’s payroll tax. And somehow, it is now yours.
If this has happened to you, it is not a mistake, and you are not the first.
This is one of the most common traps in a business restructure, and it catches careful owners just as often as careless ones.
There is a set of rules called payroll tax grouping. What it means is that the state revenue office can treat two connected businesses as one.
When that happens, each business can be made responsible for the other’s payroll tax.
So the debt from the company you closed can land on the company you just started.
It feels deeply unfair. You closed one business and started another in good faith. But to the revenue office, the two can look like the same operation under a different name.
The revenue office looks at how closely the businesses are connected. They may group them if the new business uses:
- the same staff
- the same premises
- the same accountant or office
- similar owners or directors
- the same trust
- even the old website
Moving into a company you already owned, and keeping everything else the same, is exactly the pattern that gets grouped.
It is the overlap that matters, not your intention. Even keeping the same phone number and email address can add to the picture.
It can.
Consider a family cleaning business that had traded for 15 years. When a big customer failed to pay, the owners restructured into another company they held, and closed the old one. Months later, the revenue office grouped the two. Around $850,000 in old payroll tax landed on the new business. Overnight, the new company could not pay its debts.
If the letter has already arrived, do not panic, and do not ignore it.
There are usually ways to respond. The debt can sometimes be challenged, negotiated, or dealt with as part of a wider plan for both businesses.
You do not have to work out the response on your own.
What matters most is getting advice quickly, before the revenue office takes further action.
Often, yes, if it is dealt with before the restructure, not after.
That is why the way a new business is set up matters so much when there is any tax debt behind you.
What happens to the old trusts, the premises, and the ownership all make a difference.
Getting this right at the start is far easier than arguing with the revenue office later.
de Jonge Read® helps you plan the move, set it up properly, and deal with the tax position, so the past does not follow you into the new business.
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
