Small businesses, from pubs through to bakeries, are using legal restructures to wipe debts and keep their doors open. The practice is gaining popularity, and often it’s the tax office saying yes.
00:00Neville Walton has a message that you don't always hear.
00:06Cheers to the tax office, thank you.
00:08The Publican recently convinced the ATO to wipe most of his pub's unpaid tax bill which was up to $350,000.
00:17Hopefully in the 18 months time I can come out of it debt free.
00:21Neville used restructuring laws that let small businesses ask entities that they owe money to to wipe large chunks of this debt.
00:29If they approve it then that plan sort of resets the company including the debts that it owes so that it can continue to trade afterwards.
00:38More of these restructures are being lodged and construction, accommodation and hospitality businesses are using them the most.
00:4634% involved debts between $200,000 and $400,000 with businesses on average asking for 79% of this to be wiped.
00:56Almost 9 in 10 restructures went through.
00:59The ATO is the largest creditor in most small business restructures and that means that they control the voting.
01:08Most of the companies that are going through these restructures are still registered within the next year.
01:14But beyond this there is very little data about the long term success of this policy and whether it's encouraging good business or simply wiping debt.
01:24ASIC says that there's no evidence that these laws are being misused but some still have mixed feelings.
01:30I think there's some downside there where it can be utilised to avoid paying debts.
01:37The Albany Hotel is still trading six months later.
01:41Although I won't have anything to sell with the business I'll be able to sleep at night.
