Tips for Business Survival Michael Noon Director SRJ Chartered Accountants and Business Advisors Michael Noon Director SRJ Chartered Accountants and Business Advisors

Insolvent trading Director has a duty to prevent the company trading in an insolvent state Directors are required to be aware of the financial position of the company at the time of incurring debt Number of statutory defences for a Director against insolvent trading claims -difficult to rely on

Insolvent Trading (cont) Series of Director penalties that may apply -Civil penalties -Compensation for amounts lost by Creditors -Criminal charges for dishonesty -Director liability for employee entitlements -Director Liability for particular unremitted taxes

Insolvent Trading (ATO debts) Directors liable for unremitted taxes when the company has not paid; - PAYG Withholding amounts -Alienated personal service payments Directors must cause one of the following; -company to make payment by due date -make an agreement with the ATO to pay o/s amount

Insolvent Trading -Appoint an Administrator of the company -Begin winding up the company Non – action means the Director becomes personally liable for the debt. Director Penalty notice

Director Penalty Notices Penalty notice required to be issued before ATO can action recovery from Director Notice must state; -unpaid liability -penalty will be remitted if within 21 days if one of the following occurs; * Liability has been paid, * Company enters administration * Company is being wound up ATO not entitled to recover until 21 days after the issue of the penalty notice.

Director Penalty notices(cont) Penalty notice is served from the time of posting. Multiple Director penalty notices are common – Parallel liabilities are established. ATO can “pick and choose” Directors Defences include; -Illness -reasonable steps taken

TIPS for Director Penalty notices Do not ignore. Be decisive as a Board Reach an agreement with the ATO Consider defences Check validity of the notice Director’s should not hold assets where possible. Consider refinance options

Refinancing Review current facilities and appropriateness. Consider security held and “excess security” held by the financier. Revisit term of existing loans. Can principal repayment component be reduced on existing facilities. Consider bringing 2 nd tier lenders to the table – exert pressure on existing financier Sale and leaseback of existing assets. Consider restructure to convert non-deductible debt to deductible debt

Refinancing Always have another banker pursuing your business. Review Debtor finance options to unlock equity in working capital. Can succession planning be brought forward to facilitate capital injection.

FBT changes Reforms to Motor Vehicle Fringe Benefits announced in May Budget. Change to Statutory Formula method

FBT changes Distance travelled during the FBT year (1 April – 31 March) Before 10 May 2011From 10 May 2011From 1 April 2012From 1 April 2013From 1 April – 15,000km ,000 – 25,000km ,000 – 40,000km More than 40,000km Source: Budget Paper No, p23; Treasurer’s Press Release: Reforms to car fringe benefits rules, 10 May 2011.