Proactive Strategies for Dealing with ATO Tax Defaults and Insolvencies
Provided by Results Legal, featuring Anna Taylor, Principal at Results Legal
Over the past year, businesses have faced increasing challenges due to changes in how the Australian Taxation Office (ATO) discloses tax debts. Specifically, tax debts over $100,000 are now being publicly disclosed, leading to a rise in ATO tax defaults being registered against businesses.
According to Anna Taylor, a Principal at Results Legal specialising in commercial litigation and trade credit, this has contributed to uncertainty in the market and an uptick in insolvencies. As a result, Results Legal has been advising clients on proactive strategies to minimise risk during these turbulent times.
“One of the main strategies centres around security,” says Taylor. “We’re talking to our clients about their security strategies, and finding ways to protect their business in case of a worst-case insolvency scenario.”
Implementing robust security measures can make a crucial difference in recovery outcomes. “For example, having the ability to rely on a real property charge derived from an agreement at the time of an insolvency appointment can be the difference between a recovery and no recovery at all,” Taylor explains.
For credit managers dealing with customers facing ATO defaults, Taylor’s advice is clear: “The best thing you can do when you receive that information is to make sure your house is in order.” This means carefully evaluating your customer base, identifying those with defaults listed, and taking steps to protect your business.
Taylor cites a recent case where one of her clients had supplied stock to a company that later appointed a liquidator. “My client had done all the right things – they’d registered their ALLPAAP, their retention of title (ROT) through a Purchase Money Security Interest (PMSI) and had a security agreement in place.” By promptly notifying the liquidator of their secured position, Taylor’s client was able to recover the full outstanding debt, as well as legal costs incurred.
“This is a perfect example of how being proactive and having your security strategy in place can be the difference between a positive outcome and not, and can maximise your return upon an insolvency event,” Taylor states.
As insolvency numbers continue to rise, partly driven by the ATO default disclosures, Taylor and her team are urging businesses to be proactive. “The strategies we’re putting in place for our clients are looking at the big picture and making sure that, in the event of an insolvency, cash flow issue, or change in trading arrangements, they’re protected.”
“If you have any questions or find yourself in a spot where you have had a default listed against one of your customers, or you’re just not really sure what strategy to put in place, reach out to us – we’d be more than happy to help,” Taylor concludes.
For credit managers navigating this challenging landscape, it is important to seek specialist advice to ensure you are putting the right strategies in place to protect your business.
To be connected with our valued partners at Results Legal, please contact us [email protected]