Small businesses turn to SBR process as ATO accelerates debt collection

Small Business Restructuring plans and inquiries are on the rise – and a key driver is the ATO’s renewed debt collection. During the early days of the pandemic, the ATO deliberately shifted down a gear with its debt collection activities. But this year the ATO has shifted up several gears as it becomes more aggressive to collect monies owed. In the past four years, collectable debt has increased 89% to $50.2 billion by June 2023, with small businesses owing over $33 billion of the $45 billion of collectable debt owed by all businesses. And, as the Deputy Commissioner said recently, it’s a trend “we need to turn around”.

The latest Alares Credit Insights report shows a decrease ATO Court initiated winding up petitions during September. However, it doesn’t mean the ATO has taken its foot off the pedal. “You will have seen more activity over the last 12 months, with an increase in firmer actions, and a willingness to escalate to legal actions, for large debts especially those who are choosing not to engage. Practically speaking, this means you and your clients can expect to see us acting earlier than we have been,” said Mr Chaudhary.

“Where we see businesses behind in tax, there is a fair chance they are also falling behind in payments to creditors, suppliers and even employees. This is not good for those directly impacted, the tax system, or the business itself.”

– Vivek Chaudhary, Deputy Commissioner, ATO

Small Business Restructuring spikes as small biz owners choose to stay in the driving seat

During the July-September 2023 quarter, Jirsch Sutherland experienced an over 200% increase in Small Business Restructuring (SBR) plans – and we expect they’ll continue to rise. According to the latest Alares Credit Insights report, the uptick in SBRs has corresponded with the drop in ATO Court initiated winding up petitions, as more directors seek help via the SBR process.

Reasons for the spike?

  • There’s a greater understanding of the process and benefits among key stakeholders: small businesses, creditors, Small Business Restructuring Practitioners.
  • The ATO’s ramped-up debt collection activities, which is motivating directors to go down the SBR path.
  • Directors remain in control of the business throughout the process.

“The process’s success is in the planning and communication with the creditor group,” says Andrew Spring, one of Jirsch Sutherland’s 17 SBR Practitioners. “A successful SBR must demonstrate why the business finds itself in a precarious financial position, as well as how those events or circumstances have been addressed and overcome, while also convincing creditors and other stakeholders that it’s in their interest to support the restructure. It means this process requires careful consideration to ensure it has the best chance of a successful outcome for all parties.”

We have guided thousands of businesses and individuals experiencing financial distress

It’s crucial for directors to partner with an appropriately experienced SBR practitioner. Every scenario is unique and must be treated as such; there’s no cookie-cutter solution in corporate insolvency. Working with an experienced practitioner can be the difference between a successful outcome and being caught in a deeper hole.

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Personal insolvency occurs when you, as an individual, are unable to pay your debts. As each individual situation is different, so are our solutions, which include bankruptcy and personal insolvency agreements.

Our Bankruptcy Trustees pride themselves on doing everything possible to help clients find a way to solve their financial problems and to protect them from the emotional trauma of dealing with creditors – and set them up for a better recovery. 

Our specialist experience and sensitive approach can help determine the best, most practical solution for individuals concerned with personal insolvency issues. Take the first most important step by seeking our assistance today.

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More about the small business restructuring process & eligibility

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