Death and Taxes: Navigating out of arrears and unlocking working capital

Death and Taxes: Navigating out of arrears and unlocking working capital
Closeup of secretary taking notes in a meeting

Nothing is more certain than having the ATO come collecting on your back taxes. Manage it correctly, face a hefty payment or worse, liquidation.

You’ve used the tax office as your line of credit long enough “the jig is up”.

It’s common for businesses to avoid alternative funding solutions or they believe it is too hard to arrange formal commercial finance facilities. Often it’s simply easier to fall into the trap of thinking that you’ll dig yourself out of the debts.

The reality is that you’re undercapitalised and often state that you’re “too busy” or just oblivious to the dangers that lie ahead if left unattended.

If you’re weighing up the difference between taking on a funding source or using the tax office as a “quasi-lender” you’ll risk being lulled into a false sense of “it’ll take them so long to chase me and by then I’ll have paid it down”.

Why you don’t want the ATO burden

  • Arrears are only tolerated to a point
  • Placed on the ATO as a slow/bad payer
  • Directors can/will become personally liable for debts
  • Miss a payment on an arrangement & it’s lights out
  • Default rates of interest are applied to the debt
  • Creates another creditor you’ll be taking calls from
  • If ATO policy changes, you can be wound up without warning

What action can the ATO take?

  • A Garnishee notice against wages through your employer or contractors
  • A Garnishee notice against trade debtors and merchant card facility suppliers
  • Issue a statutory demand & apply to wind up the company in the Federal Court
  • A liquidator will be appointed to sell company assets

Steps credited to Aravanis learn more at

“We’ve experienced clients with tax debts in excess of $1 million, with the ability to raise $3 million against receivables or have sales orders we can finance that will generate substantial profits. The business owners are either not willing to seek an alternative or have been poorly advised. Businesses can inject more than enough capital to pay ATO debts ongoing and have access to sustainable healthy working capital,” Leigh Dunsford, Stak.

What are the alternative funding sources?

Below are the common funding tools used while undergoing repayments to the ATO. In general, terms, once you fall into arrears with the ATO bank funding becomes unattainable.

Receivables finance – No need for real estate security, draw up to 80% of receivables.
Bridging term loan –  Fixed term loan that relies on the equity in your real estate.
Trade Finance – Funding to pay suppliers for inventory or equipment sales.

The above working capital sources will support you during repayments, including restructures and provide a cost-effective source of ongoing capital to operate your business.

See if Stak can fund your ATO payments & continued growth

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We regularly share our thoughts on trade finance, lending, company culture, product strategy and design.

Stak works with clients that sell to some of the largest buyers in Australia & overseas.

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