News

25 Oct 2012

How the Insolvency Guys shaft you. Warning!

25 OCT 2012

Last month a CX subscriber who operates a business called to say he had a remarkable experience relating to his tax account with the Australian Tax Office.

He says he was behind to the tune of around $150,000, and knew this. Over the past year he had several family disasters, the likes of which would knock anyone around. The ATO kicked over his account from overdue to legal, and reassessed the amount due as $360,000 – including penalties and interest.

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That got his attention, he says, especially as they gave him 21 days to pay up, or face the wind up of his business. They would also freeze his accounts, which as anyone in business knows, makes it impossible to trade.

Our subscriber did what you would probably do, he sought the help of a well credentialed tax accountant in his capital city. This is where the shock and awe started, because instead of the accountant offering to pick up the phone and negotiate with the ATO, he instead advised on a Scheme of Arrangement, where the business would be placed in Voluntary Administration.

The accountant had colleagues who were versed in this, he said, and ‘everyone is doing it’. For less than 100 grand, he would ‘get me out of it’, said the subscriber.

“I was put under pressure, and I can imagine most people in my frame of mind would just go with the professional advice and do what they say, to get some closure. But I’ve been in business a long time, and could see this was not the right way to go”.

He got his head together, and called the ATO. “It took a while to get to the right person, but they understood my position”, he said. “I offered to pay the original amount due, and said I would borrow money against property to do just that. And they accepted.”

The ATO would have been shafted under the VA – the tax accountant was upfront that everyone would get 15 cents in the dollar – including all the creditors and contractors of the business.

The outcome is that our subscriber managed his affairs, paid the ATO, and continues in business without inflicting the damage on those associated with his business.

“It was just wrong”, he said of the advice he was given.

Sure enough ASIC reported a high number of firms entering external administration in August – 996, up 7% on July.

 

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