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It’s December and the bells are already starting to jingle. But in a year full of upheaval and uncertainty, there is one thing small businesses need to do before the silly season begins: see their accountant.
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Why you need to see your accountant before Christmas
04 December 2020
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9 minute read
There are many compelling reasons why it’s necessary to seek professional accounting assistance and advice at this celebratory time of the year.
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Temporary laws that raised the thresholds for issuing statutory demands will end on 31 December. There is an acknowledged risk that debt collection enforcement will ratchet up in 2021, meaning that companies sailing too close to insolvency may end up in liquidation by order of a court.
A liquidator can pursue directors personally for company debts via an insolvent trading claim. If the debtor company has failed to adequately maintain and keep financial records as required by the Corporations Act, the company is presumed to have been insolvent. To avoid an insolvent trading claim, the least that insolvent companies should now do is to get their accounting records at least reasonably up to date.
Since 1 April this year, a company’s GST debt was added to PAYG and SGC as potential personal liabilities of directors if issued a Director Penalty Notice by the ATO.
However, provided activity statement lodgements are never more than three months overdue and SGC is always reported on time, the most the ATO can do is issue a DPN which allows directors the opportunity to avoid liability by, within 21 days, either negotiating a settlement with the ATO or placing their company into voluntary liquidation or voluntary administration.
The ATO amnesty on unreported late superannuation came to an end in September. While not ideal, a case could possibly be made to the ATO for making a late submission and asking it be viewed on favourable terms, but time is running out.
Record-low interest rates are offering up opportunities to refinance old debt more cheaply or to expand operations or acquire new capital equipment. It will be necessary to provide financiers with up-to-date financial statements to maximise negotiating power with the banks, and hence another reason to visit your accountant.
By 1 July 2021, every business needs to be using Single Touch Payroll, so if you have not yet started using it, or you need assistance, now is the time to get expert advice.
Insolvency laws are being reformed with the introduction of a genuine debtor-in-possession restructuring process that does not require the engagement of a safe harbour business expert. Instead, a Small Business Restructuring Practitioner needs to be engaged to assist a board present the terms of a restructure proposal to creditors.
The “Debt Restructuring Process” has two key eligibility criteria — firstly, employee entitlements cannot be overdue, and secondly, lodgements with the ATO must be up to date. DRP is an opportunity for business knocked sideways by the pandemic, but with the ability to recover, to put a proposal to creditors to get a recovery happening more quickly.
So, if directors or owners of the thousands of Aussie small businesses want a happy new year, now is the time to book that all-important meeting with their accountant.
Brendan Nixon, partner, SM Solvency Accountants
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