December 2, 2020
With COVID-19 impacting so many businesses severely, the ATO is warning businesses about questionable "pre-insolvency advisory firms". Facing the closure of a failing business for many can be a terrifying and lonely feeling.
We have seen on numerous occasions organisations that are struggling financially will be contacted seemingly out of nowhere by "advisory firms" seeking to provide "assistance" to orderly restructure their assets prior to going to insolvency. As a seemingly easy way out, this unsolicited assistance often has great appeal to many struggling business owners who are fearing the closure of their business, loss of personal assets and other significant stress. Unfortunately, the "advice" provided is usually overpriced, has questionable legality and these "advisory firms" conveniently disappear when the liquidators have issue with how the restructure was performed.
The ATO is warning taxpayers who may be thinking about pausing, changing or closing their business, due to the current economic conditions, to be wary of untrustworthy advisers who may recommend inappropriate or illegal behaviour.
This could include illegal phoenix activity, where businesses intentionally remove their assets prior to winding up so that they can be used in a copy of the original business.
Red flags include:
🚩 people the taxpayer doesn't know cold calling with advice;
🚩 unsolicited letters, emails or phone calls after the taxpayer has been through court action with a creditor;
🚩 advice to transfer assets to a third party without payment;
🚩 refusal to provide advice in writing;
🚩 advice suggesting they have a sympathetic liquidator who will protect the taxpayer's personal interests and assets;
🚩 advice to withhold certain records from the bankruptcy trustee or liquidator, or provide incorrect information to authorities; and
🚩 advice to deal with the liquidator or trustee on the taxpayer's behalf.
We recommend that before pausing, closing or changing your business that you discuss it with us first prior to making a decision. We have built relationships with external organisations that provide assistance in different scenarios and can point you in the right direction.
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- 2020/2021 Federal Budget
- ALP Key Tax Policies
- ATO warning regarding annual leave loading and OTE
- COVID 19 – Federal Government Support
- Deferred repayments. Is accrued interest on deferred loans tax deductible?
- Fast-tracking tax cuts for small and medium businesses
- Fraud risks in a COVID-19 environment
- How financial advisors can build trust
- How to apply for JobKeeper & Key Dates
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