21 Sep Restructuring a Plumbing Contractor with a $775,000 ATO Debt
Capability: Restructuring & Turnaround
Industry: Construction / Building Services
Appointment: Small Business Restructuring (SBR)
Overview
The company is a well-established plumbing contractor with more than 10 years of trading history, specialising in large-scale government and commercial projects. It has annual turnover above $10 million and more than 60 employees. The company had historically met its taxation obligations, and the financial pressure it faced was a departure from its usual performance.
Challenges
- About $775,000 owed to the ATO and about $200,000 owed to unsecured creditors
- Cash flow constraints as builders collapsed, leaving bad debts of more than $700,000
What is small business restructuring?
Small business restructuring lets an eligible company keep trading under the control of its directors while it proposes a plan to pay creditors part of what they are owed. If creditors accept the plan and the company completes it, the balance of the admitted debts is released. The ATO explains its approach to small business restructuring, and ASIC sets out small business restructuring and the restructuring plan for directors.
Greengate Advisory’s approach
We reviewed the company’s trading position and its exposure to the collapsed builders, then worked with the directors on a restructuring plan funded by an upfront payment and monthly contributions, which was put to creditors.
The restructuring plan
- An upfront payment of $40,000
- $9,000 a month for 24 months
Outcome
- Debt reduced from about $975,000 to about $256,000, a reduction of about 74 per cent
- The ATO and other creditors agreed to a return of 26.25 cents in the dollar
- The plan was completed and the remaining ATO balance was written off
- The reduction gave the business breathing space and a clearer path forward
How Greengate Advisory can help
If your construction business is carrying an ATO debt after bad debts from a collapsed builder, small business restructuring may allow it to keep trading. Outcomes depend on the circumstances of each business and on creditors accepting the plan. Read our small business restructuring guide or contact us for a confidential discussion. We can explain the options in English, Mandarin or Korean.
