a man making ATO payment a man making ATO payment

Case Study - ATO Payment Arrangement

  • August 12th, 2018
  • David Hill

A surf clothing distributor encountered cash flow problems causing it to accumulate a large tax debt. The main cause of the problem was the closure and non-recoverability of one of its main debtors, causing the tax office to commence recovery proceedings for the tax debt. The Directors of the company approached Australian Debt Solvers to help the company deal with its tax debt and liaise with the ATO

After a review of the company’s financial position, we were confident the business was simply suffering a short term cash flow problem. Firstly, as the business was in the surf clothing industry it was exiting the winter low season and entering into summer & the holiday season. It required a large portion of its available capital to purchase stock, and therefore, did not have adequate capital to pay the tax debt in full.

Upon our review of the balance sheet, the reason for its poor financial status (bad debtor), and the projected revenue in the coming months, we were confident it would be able to pay both the past and future tax debt in full within 6 months.

We firstly commenced communication with the company’s accountant in getting the management accounts up to date. We then worked with the company and its accountant on a 12 month budget and cash flow projections, and prepared two scenarios. One scenario was conservative while the other was aggressive. The conservative scenario showed the tax office being paid in full within 9 months, and the aggressive scenario showing the tax office being paid in full within 6 months.

We then compiled all the information into a concise report which was given to the ATO for consideration. The ATO accepted a 9 month payment plan. The tax debt was repaid in full within 8 months. In addition, the company accumulated sufficient capital within its balance sheet to be able to purchase stock for the following year’s summer season.

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