Payroll tax is a financial obligation that your company may need to pay. Each State and Territory have their own sets of rules and tax rates. In Western Australia for example, businesses that spend $83,333 per month or $1 million in a year in staff wages are required to contribute a percentage to the state's coffers, with the current rate set at 5.5%.
Check here for your State or Territory - Payroll Tax Rates and Thresholds - National
In 2020 Covid 19 took us all on a journey, it was nothing we expected or understood and we took it one week at a time. Ultimately, the Government was more concerned about relieving the pressure this brought to us than the debt that was owing. The lasting impact was extensive, and we are now seeing some of the less obvious casualties emerge. This four-year period may have lulled some companies into keeping their business alive, rather than attending to their growing debt.
What happens if you owe payroll tax? Unfortunately the ATO is now hitting back!
In the 2023-2024 the Australian Tax Office (ATO) corporate plan included their top priority - addressing mounting debt. Late last year the Tax office began to crack down on companies that had lapsed in meeting their payroll tax and superannuation guarantees.
On September 6th, 2023, the ATO Deputy Commissioner (Vivek Chaudhary) stated “remissions on interest charges and penalties would become the exception rather that the rule.” *
He further went on to discuss the small business being responsible for $33 billion of the $45 billion collectable debt owed by companies, with debt having surged by 89% over the past four years.
This statement was critical of small businesses “they appear to be de-prioritising payment of tax and super when they should be provisioning for these bills like they would any other business expense.”*
To add to this the Tax Office Commissioner (Chris Jordan) stated “it’s not fair for businesses with outstanding debts to continue to use the ATO as a low interest loan facility.”*
In November and December 2023, businesses began receiving notices and were sent to debt collection. Some have had to go into voluntary administration, perhaps for the first time.
What is voluntary administration?
When a company goes into voluntary administration it indicates that there are financial difficulties.. Administration is a legal process that provides a company with breathing space, the opportunity to reorganise or find a resolution to is obligations.
Researching the ASIC website with defaulting the search to disability, there seems to be a lot of disability service companies in trouble.
Let's break down some important points and what they mean:
Financial Distress: When a company is in debt and its liabilities are more than its assets, making it difficult to meet financial obligations.
Appointment of an Administrator: The process starts by appointing an administrator, a licensed practitioner. Directors, secured creditors, or a court can initiate this.
Legal Protection: Once in administration, the company gets legal protection through a moratorium, freezing legal actions during this time.
Assessment and Options: Administrators assess the company's situation and explore options. This could involve selling the business, making a Voluntary Arrangement, or liquidating assets to pay creditors.
Company Continuity: The goal is often to keep the company going or maximise returns for creditors. In the disability sector, it's crucial for companies to continue serving participants.
Creditors: Creditors are kept informed, and they may vote on proposals, deciding how the business repays debts.
End of Administration: The process concludes when objectives are met. This could be restructuring, finding assets to sell, or sale of the business. If no solution is found, liquidation might be the last resort.
Impact on Employees: Employees are protected during administration. They keep their positions and might transfer to a new owner if the business is sold.
Communication and Transparency: Being open and transparent is vital. Everyone involved needs to know about any developments or decisions.
If you company is facing financial hardship, owes payroll tax and enters into voluntary administration it can offer the lifeline for you to reorganise and shift the company back to viability. The goal of this process is to protect your company, your employees, and your creditors during this challenging time.
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