Case Studies

How Tax Debt Busters has helped eliminate Business Tax Debt

1. Missed Payment

From Missing a BAS Payment to on-time and stress free payments.

John's Story

John, an electrician, found that he couldn’t pay his quarterly BAS. He called Tax Debt Busters to negotiate a payment arrangement on his behalf. Firstly, we investigated what was happening within John’s business, and gained a better understanding of why he couldn’t pay his BAS on time.

John had been so busy on tools that he hadn’t spent any time chasing up his outstanding invoices and he wasn’t aware that his debtors had ballooned.

Having identified the issue, John started chasing up outstanding payments which came in over the following six weeks. We set up a payment arrangement over three months to give John some breathing space.

In addition, we helped John to implement a portable EFTPOS payment system where he provided the invoice and got paid on site when the job was completed 80% of the time, which not only fixed his cash flow issues but also saved John significant administration time going forward.

Mike's Story

Mike, a convenience store owner called Tax Debt Busters because he needed us to set up a payment arrangement as he’d just missed his last two BAS payments.

We thought this strange because Mike’s business makes very good money and doesn’t have debtor issues because customers pay at the time of purchase.

Upon review of Mike’s accounting system, we discovered that he had taken a number of larger than normal amounts out of the business’ bank account over the past 12 months to fund lifestyle purchases. The business owner spending the business’ “BAS and tax money” is a trap we see all of the time.

We set up a payment arrangement over 12 months and then worked with Mike to calculate both how much he needed a year to live and how much the business could afford to pay him.

We also helped Mike to set up a Tax Account with another bank and showed him how to calculate the amounts to transfer to that account each week and at the end of each month so that he didn’t fall into this trap again.

2. Falling Behind

From 12 months behind to comfortably trading out.

Dean’s Story

Dean’s business manufactures custom plastic sports drink bottles and called us because he hadn’t been able to pay his BAS’s for the past 4 quarters.

He couldn’t understand why he was always short of cash because turnover was strong.

We conducted an analysis of his financial performance, including a breakeven analysis. Dean had calculated his breakeven at $74,000 per month five years ago but it was now $98,000 per month due to higher rent resulting from moving warehouses as well as higher costs.

Unfortunately, Dean had been simply focusing on hitting the $74,000 turnover figure each month, thinking that if they achieved that the rest would take care of itself.

We negotiated the remittance of all of Dean’s interest with the Tax Office and helped him to borrow some extra funds on his house to pay down the balance of his ATO debt.

With our guidance, Dean reluctantly implemented an across the board price increase (i.e. they hadn’t increased their prices in five years). There was very little push back from his customers and, with a focus on a higher monthly sales target, Dean’s business was soon thriving again.

Simon’s Story

Simon runs a tiling business which is usually very profitable with plenty of money in the bank.

Over the past 6 months, that money had dwindled to the point where he hadn’t been able to pay his March BAS.

Simon wasn’t concerned because business “was always good” and he figured cashflow would pick up and he’d make the payment when it did.

When we reviewed Simon’s Xero file to assist him with his tax planning in May as usual, we were shocked to find that he had made a significant loss for the year.

Upon further review, we determined that Simon’s wages were way out of kilter with his level of income for the year. Without understanding the effect it was having to his profit and cashflow, Simon had kept his crew on even though work had dried up.

We negotiated a payment arrangement with the Tax Office and helped Simon to design and implement a simple report which allowed him to focus on some key performance indicators in his business to ensure it’s long term profitability.

3. Worse than I thought

From $200,000 in tax Debt to Clear and Profitable in 14 months.

Darren’s Story

Darren’s company owed the Tax Office $200,000 when he met with us. The debt was now out of control and was keeping him up at night. If things didn’t turn around quickly, Darren stood to lose everything.

Even worse, Darren was in the exact same situation two years ago. At that time, Darren had borrowed $200,000 from the equity on his house to pay off the debt but, because he didn’t fix the underlying issue, the problem had come straight back.

Upon review of Darren’s financial information, it was clear that his debtors were ridiculously high and his prices were way too low which led to poor profitability and cashflow.

We helped Darren collect the majority of his outstanding debtors, reduce “the fat” in his expenses and implemented a price increase project. The collection of the debtors paid off a significant portion of the tax debt and we used the newly found profits to repay the remainder of the debt over a period of 14 months.

Darren’s business is now flying with great profitability and cashflow.

4. Can’t see a way out

From $500,000 in tax debt and no way out yet saved business and personal assets with restructuring.

Paul’s Story

Paul was at the end of his rope. His business owed the Tax Office over $500,000 and had significant outstanding employee super contributions when he came to see us.

His largest customer had gone into liquidation owing him significant money. He had tried to trade through the problem but calls from the Tax Office and other creditors were becoming more threatening. He had racked up significant credit card debt just trying to stay in front of the debt wave bearing down on him.

We reviewed the business’ financial information and the good news was that Paul’s business was a strong, profitable businesses. The bad news was that there was little chance that Paul was going to be able to trade out of the debt. The even worse news was that Paul was personally liable for the outstanding employee super contributions.

To help Paul save his business, we organised for an independent valuation of the business which was then sold to a newly established entity at market value using funds Paul borrowed on the equity of his house. Those funds were used by the existing business to pay outstanding employee super contributions with the balance distributed to creditors once the company was put into liquidation.

As a result, Paul’s business was saved and stress gone as business returned to normal. We did further work with Paul to ensure that his business didn’t have such a significant exposure to individual debtors in the future by stopping work if invoice payments stray too far out of terms.

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Case Studies

1. Missed Payment

2. Falling Behind

3. Worse than I thought

4. Can’t see a way out

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