ATO Cracks Down on Small Business Tax Debts: Here’s What You Need to Know

In the wake of the Covid era, the Australian Taxation Office (ATO) adopted a lenient stance toward small businesses with GST, PAYG tax, and income tax obligations. However, the ABC recently reported that this period of leniency has come to a screaming halt and the ATO is now aggressively pursuing small businesses that owe tax debt, implementing stringent debt collection measures and shutting down businesses unable to comply.

The Current Situation

Rob Heferen, the new commissioner of the Australian Taxation Office, recently highlighted the severity of the issue. According to ABC News, small businesses collectively owe the ATO about $24 billion relating to their business activity statements (BAS). Heferen expressed concern over the growing trend of businesses falling behind on these payments, noting, “We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable.”

The numbers are alarming. Small businesses account for 65% of all collectable debt owed to the ATO, which amounts to $32.5 billion. Over the past four years, the total collectable debt, from businesses and individuals, has surged from $26.5 billion in June 2019 to $50.2 billion in June 2023 — an 89 percent increase. This sharp rise highlights the escalating pressures on small businesses across the country.

Aggressive Debt Collection

In response to the mounting debt, the ATO has intensified its debt collection efforts. Businesses with unpaid tax debts face the risk of being shut down if they fail to settle their obligations. The ATO’s hardline approach is a stark contrast to the leniency shown during the pandemic, and it serves as a brutal wake-up call for small business owners.

While the ATO is offering payment plans to help businesses manage their tax debts, these plans aren’t a get out of jail card and currently carry a general interest charge of 11.36%. Not only are you paying a high interest rate, these loans also have short repayment terms so your monthly payments can be astronomical. For many, meeting these repayment conditions may prove to be an insurmountable challenge, potentially crippling their operations.

What Can Businesses Do?

We reached out to Antony Resnick, insolvency expert and partner at DVT Group to get his thoughts on what businesses can do if they are burdened by ATO debt. He cautioned not to drown in the sea of debt but to raise your hand and ask for help. Companies that lodge their BASs but do not have the money to pay their bill are far better off from a personal liability standpoint than those who don’t lodge and don’t pay.

One option for businesses is to refinance the ATO debt through private lenders. TrailBlazer Finance is one of the few lenders willing and able to step up to the plate offering refinancing options that allow businesses to spread out repayments over five years, providing much-needed cash flow to continue operating and growing.

Take the First Step Toward Tax Debt Relief

If you’ve got ATO debt to pay don’t ignore it, raise your hand and ask for help.  We understand the pressures small businesses face and are here to help you find a solution that fits your unique situation. We invite you to set up a complimentary call with our experienced team to discuss your specific circumstances and explore how our refinancing options can help you. Reach out to us today at 1300 139 003 to clear the decks and get square with the ATO.

 

Understanding the market dynamics of trail book acquisition costs

Understanding the factors influencing trail book valuations is not just important but pivotal for making well-informed decisions in the acquisition process. These valuations encapsulate a complex interplay of multifaceted variables that can significantly impact the value and viability of an acquisition. Determining the factors influencing trail book valuations is crucial for making informed decisions. TrailBlazer Finance can help you understand the intricacies of trail book pricing across various sectors:

Mortgage Trail Books

Historically, mortgage trail books have traded at multiples ranging from 1.5X to 3X annual trail revenue. However, pricing varies significantly based on the quality of the asset. Just like buying a used car, factors such as client retention, revenue consistency, and asset quality play pivotal roles in determining the price. It’s essential to conduct external valuations to accurately assess the value of the asset being acquired.

Financial Planning Books

The valuation of financial planning books is typically based on a multiple of annualised recurring revenue (CSR), with historical norms around 3X. However, market sophistication has led to variations in pricing based on revenue streams, client base stickiness, and service offerings. Conducting detailed valuations and analysing revenue breakdowns are essential steps in determining the fair price for financial planning books.

Real Estate Rent Rolls

Rent rolls, representing real estate rentals, typically trade within the range of 2.5 to 3.5 times annual revenue. Factors such as client retention, vacancy rates, and rental reliability influence pricing. The focus is primarily on management fees and the quality of underlying properties.

Accounting Practices

Accounting practices are usually valued at 0.8 to 1.2 times annualised revenues, with considerations for achievable EBITDA. Client base stickiness, service availability, and eligibility of potential acquirers significantly impact pricing. Conducting thorough due diligence is essential to accurately assess the potential value of accounting practices.

Navigating trail book acquisitions requires a nuanced understanding of market dynamics and valuation principles

Taking into account elements such as asset quality, revenue streams, and client retention empowers you to make well-informed decisions and negotiate equitable prices. Engaging with experts like TrailBlazer Finance and conducting thorough valuations are indispensable components for a prosperous acquisition journey.

For finance professionals gearing up for an acquisition, our team offers confidential consultations customised to your unique circumstances. Alternatively, immerse yourself in our comprehensive eBook, “Acquisition Ready,” to acquire a deeper comprehension of the acquisition process and arm yourself with invaluable insights for achieving success.

 

Interested in gaining insights into the crucial aspects of a prosperous acquisition? Our comprehensive eBook, “Acquisition Ready: The 10 Things Finance Professionals Must Cover,” meticulously crafted by our specialist funders, offers valuable guidance to navigate the process effectively. Download today.

A comprehensive guide to navigating legal documentation in acquisitions

Embarking on an acquisition journey entails navigating a maze of legal documentation essential for a successful transaction. Let’s delve into the key legal documents required and their significance in the acquisition process:

2nd Level: Reference ability Checks

Delving deeper, it’s essential to scrutinise the character and reputation of the vendors involved. Conducting reference ability checks by reaching out to business development managers, partnership managers, and individuals associated with the target acquisition provides invaluable insights. Identifying any red flags regarding the vendor’s integrity or reputation is crucial, as acquiring an asset tainted by poor character can prove detrimental to your business. TrailBlazer Finance has numerous methodologies to delve deep.

3rd Level: Legal Searches

Lastly, thorough legal searches are indispensable to ensure a seamless acquisition process. These searches encompass verifying ownership, clearing titles, and identifying any encumbrances or outstanding debts associated with the asset. By meticulously conducting these searches, you safeguard against potential legal entanglements that could impede the acquisition’s success.

Although every acquisition journey may unfold with its own set of nuances, certain foundational principles persistently stand firm. With the expert assistance of TrailBlazer Finance, meticulously addressing these aspects of due diligence empowers you with the optimal opportunity for success in your acquisitions endeavours. 

Interested in gaining insights into the crucial aspects of a prosperous acquisition? Our comprehensive eBook, “Acquisition Ready: The 10 Things Finance Professionals Must Cover,” meticulously crafted by our specialist funders, offers valuable guidance to navigate the process effectively. Download today.

How to complete a thorough due diligence when acquiring a business

In the ever-evolving realm of business expansion, acquisitions emerge as powerful drivers of success. They present a thrilling opportunity to instantly double your business, skipping the lengthy process of organic growth. Through acquisitions, you not only achieve increased scale and efficiency but also gain the freedom to delegate day-to-day operations. Furthermore, your margins, purchasing influence, and market share undergo swift enhancement, marking the dawn of a prosperous new era.

However, the road to successful acquisitions is paved with layers of due diligence. Successful acquisitions hinge on meticulous due diligence across asset valuation, reference ability checks, and legal searches. By prioritising these critical steps and leveraging the expertise of TrailBlazer Finance, you pave the way for transformative growth and prosperity in your business ventures.

1st Level: Asset Valuation Due Diligence

At the outset, it’s imperative to conduct due diligence on the true value of the asset you’re acquiring. Engaging a third-party expert to perform a detailed valuation ensures accuracy and transparency in assessing the asset’s worth and its potential for leveraging. While some may possess the expertise and resources to undertake this task internally, most opt for the objectivity and proficiency offered by external valuers.

2nd Level: Reference ability Checks

Delving deeper, it’s essential to scrutinise the character and reputation of the vendors involved. Conducting reference ability checks by reaching out to business development managers, partnership managers, and individuals associated with the target acquisition provides invaluable insights. Identifying any red flags regarding the vendor’s integrity or reputation is crucial, as acquiring an asset tainted by poor character can prove detrimental to your business. TrailBlazer Finance has numerous methodologies to delve deep.

3rd Level: Legal Searches

Lastly, thorough legal searches are indispensable to ensure a seamless acquisition process. These searches encompass verifying ownership, clearing titles, and identifying any encumbrances or outstanding debts associated with the asset. By meticulously conducting these searches, you safeguard against potential legal entanglements that could impede the acquisition’s success.

Although every acquisition journey may unfold with its own set of nuances, certain foundational principles persistently stand firm. With the expert assistance of TrailBlazer Finance, meticulously addressing these aspects of due diligence empowers you with the optimal opportunity for success in your acquisitions endeavours. 

Interested in gaining insights into the crucial aspects of a prosperous acquisition? Our comprehensive eBook, “Acquisition Ready: The 10 Things Finance Professionals Must Cover,” meticulously crafted by our specialist funders, offers valuable guidance to navigate the process effectively. Download today.

Navigating the Approval Process in Acquisitions

A successful acquisition has the potential to transform your business, offering immediate scalability, improved efficiency, and the ability to delegate day-to-day operations. Moreover, it can result in instant enhancements in margins, purchasing power, and market share, propelling your business towards unprecedented success.

However, when venturing into the world of acquisitions, understanding the intricacies of the approval process is paramount. Before proceeding with an acquisition, thorough familiarisation with all relevant legal documentation outlining future payment rights is essential. Let’s delve into what you need to know:

Aggregator, Dealer Group, or Franchise Approval

In the acquisition landscape, securing approval from your aggregator, dealer group, or franchise is often a prerequisite. This step is vital as it grants you the legal right to take ownership of the acquisition target. However, it’s essential to note that approval procedures can vary significantly depending on the entity involved. Trailblazer Finance can guide you through this process. 

Restricted Approval

Approval may come with certain constraints. For example, some aggregators restrict acquisitions to their existing members, while specific mortgage managers may impose prerequisites such as specific guarantees and qualifications. Similarly, franchises typically require acquirers to become franchisees to access acquisition opportunities.

Failing to obtain the necessary approvals poses a significant risk, potentially resulting in the nullification of the acquisition and the loss of deposits or payments made.

Poorly executed acquisitions can spell disaster. Inadequate preparation and due diligence can devalue both the acquired asset and your existing business. Compliance issues further exacerbate the risks, potentially causing irreparable damage.

At Trailblazer Finance, we specialise in guiding clients through the acquisition process, ensuring optimal outcomes every step of the way. From conducting due diligence to negotiating agreements and securing financing, we provide comprehensive solutions tailored to your unique needs. With our expertise by your side, you can navigate the complexities of acquisitions with confidence and achieve your business objectives. Trust Trailblazer Finance to be your partner in success.

Eager to gain in-depth insights into the crucial elements of a successful acquisition? Download our comprehensive eBook, “Acquisition Ready: The 10 Things Finance Professionals Must Cover,” crafted by our specialist funders.

AFG adds specialist lender, TrailBlazer Finance, to lender panel

The aggregation group has appointed a specialist lender, TrailBlazer Finance, to its asset finance panel, making more products available to its broker members.

Australian Finance Group (AFG) has welcomed trail book lender TrailBlazer Finance to its asset finance lender panel.

The addition will provide AFG brokers and their white-collar clients with access to the lender’s funding products and advice, which is specifically created for those with recurring revenue streams, such as brokers, financial planners, accountants, real estate managers and other cash flow businesses.

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The Balloon Booster: Our new low repayment loan for brokers and planners

We recently launched a new low repayment loan for mortgage brokers and financial planners. Designed to boost cashflow, the Balloon Booster is structured like a balloon loan and features lower monthly repayments and flexible end-of-term refinancing options, allowing the balloon to be paid out or refinanced into a two-year loan.

Importantly, the loan product allows brokers and planners to better manage cashflow and maximise working capital at a time when many small businesses are struggling with their short-term cashflow needs.

Jeff Zulman, Managing Director of TrailBlazer Finance commented, “We know from talking to our clients that right now many brokers and planners need a short-term cash boost to free up working capital as they navigate the evolving post-COVID-19 market.

The Balloon Booster is designed specifically for this purpose. It is a low repayment product, with repayments 50 per cent or lower than those of our standard loan product. This helps our SME clients manage cashflow when they need it most.

The new loan product further strengthens the specialist lender’s offering to its broker and planning clients, with Mr Zulman adding, “TrailBlazer Finance is committed to delivering the best possible solutions for these white-collar professionals. We are proud to be able to provide a product which is tailored to the needs of our clients, and the industry more broadly at a time when others are tightening their credit criteria and raising rates.

The Balloon Booster, our low repayment loan for mortgage brokers and financial planners

How to use these challenging times to grow your brokerage

It goes without saying that large and small businesses alike are facing unprecedented challenges in the current environment. Brokers are certainly well-versed in how to hand tough times. What we know from those times is that where there are challenges there are invariably opportunities. Sometimes it’s simply a question of finding a partner to help you realise those opportunities when they present themselves. 

In 2014, Chris Booth caught wind of an unmissable opportunity. At the time, he and his other business partners were running a successful full-service financial advisory business, Announcer Mortgages (now Infocus).

When they were offered the chance to buy an undervalued client book, an acquisition that would allow them to increase their footprint and further diversify their business, they decided to try to pull together the funds to make it happen. Knowing the book would eventually appreciate, they hoped to engage, convert and grow as many clients as possible before selling the book at a higher multiple.

Chris Booth, Head of Lending, In Focus

Chris Booth, Head of Lending, Infocus

Finding funding

Having pooled their income streams, Chris and his partners shopped around for lenders to fund the purchase. Unhappy with the options available to them, Chris spoke to the Executive Director at his aggregator who facilitated an introduction to TrailBlazer Finance’s Managing Director, Jeff Zulman. Using a specialist trail book loan from TrailBlazer, Chris and his partners were able to borrow against Announcer’s mortgage trail book, rather than risk personal assets, in order to free up the capital to buy the book.

In the end, we proceeded with the loan purely because of Jeff and the team. They made themselves physically available to us throughout the process and it gave us great confidence, both personally and professionally, that we were making the right decision with the right lender.

Making growth happen

At the time of purchase, Chris was working with another part-time broker. While the business didn’t convert quite as many clients as they’d bullishly projected, they did manage to sign on around 500 fee-paying full-service clients from that book alone. By the time he and his partners decided to sell the business three years later, Announcer had increased in size to three full-time brokers, their client roster had more than doubled and the business had grown by almost 130 per cent in terms of the underlying trail. They subsequently sold the business to Infocus in 2017, repaying any remaining debt and banking a tidy sum.

Words of advice for brokers looking to grow

While Chris is the first to admit the industry is in a very different place in 2020, post-Royal Commission and mid-COVID pandemic, he would do it all over again. As a small business success story, does he have any advice for other brokers seeking to grow their business through acquisition?

Using borrowed money is a good way to acquire clients and build your business quite quickly. You have a warm opportunity to call which makes it so much easier than building a book from scratch. Would I buy a mortgage book right now? Absolutely yes, the multiples are good, even though the market has some unknowns after the Royal Commission.

Acquisitions done properly absolutely work. However, be ready for it to take far longer than you’d expect to work a client book effectively. Ultimately, you still have to win the hearts and minds of the clients. One of the biggest learnings from the financial planning industry is that they didn’t try to win the clients. You have to call and build relationships, be proactive and be positive. Building those relationships is everything.

Let us help

If you would like to find out about how we can help your business grow with our unique loan products for brokers and other white-collar professionals, please contact us on 1300 139 003 or at info@trailblazerfinance.com.au

Will you be swimming between the flags this year or will you drown under debt?

I started my year with a scary experience. Whilst ocean swimming early one morning with friends beyond the breakers, I lost my form – and then my nerve. With my friends out of sight and shouting range, I decided to make my way back to the safety of the beach. However, to do so meant battling through a churning, dumping swell. I felt totally out of my depth. When,  finally, I made it unsteadily to the shore, I was shaking, heaving and questioning my choice of hobby. Fortunately, it was just one bad day at the beach for me. I could chalk it up to experience and I was back in the water two days later. I am one of the lucky ones.

While listening to a recent podcast with Accountants Daily, My Business Editor, Adam Zuchetti about small business tax debt, I had a flashback to that experience for an entirely different reason. Adam reported that a staggering 20 per cent of Australian small businesses are currently on an ATO payment plan. That’s some 800,000 small businesses who are financially overwhelmed, many of whom are drowning in debt.

One of the more shocking revelations from the piece is the comparative level of SME (small to medium enterprise) tax debt when compared to corporate Australia. The former cohort owes a whopping $16.5 billion with $1 billion contested. Meanwhile, their corporate counterparts owe just $1 billion and are locked in disputes for six times that amount. This points to the glaring discrepancy in resources between the two segments and the ability of the big guys to fight back, whilst the little guys are often forced to roll over and get carried out to sea. Moreover, it hints at the ongoing role corporates play in stretching payment terms to SMEs, thereby contributing to SMEs failing to meet their tax commitments.

It also highlights the pervasive fear of retribution small businesses feel towards the ATO.  This fear is now exacerbated by harsher penalties for missing tax payments, single touch payroll and new laws allowing the ATO to disclose tax debts to credit bureaus as part of comprehensive credit reporting. You may even have read recent press reports of harsh treatment on calls by outsourced “assistants”.

Daily, we also see a lack of understanding and education about the role the ATO does provide in easing the burden of tax debt – such as payment plans. Often SMEs mistake this for some form of back-door, inexpensive funding which, of course, it is not. The ATO is not a quasi-bank. This cocktail of fear, misunderstanding and concern about being sucked under contributes to murky and scary waters for SMEs who are struggling to meet their tax commitments. It can get in the way of proactively putting in place a plan to better manage debts by matching asset and liabilities and using recurring income to service longer-term, fully amortising debt.

I have started several small businesses myself and empathise with how easy it is to go a little off course and get sucked in out of your depth.  Suddenly you are fighting the rip, rather than working your way clear.  Progressively exhausting yourself and depleting your resources, unable to find a route to swim clear. We understand that an ATO payment plan is a sign of a struggle and that the struggle is real for small business.

Sometimes small business just needs someone to give them a break; throw them a life ring or give them financial support until they can catch their breath. There’s no shortage of new fintech lenders who have plunged into the market, particularly in the vacuum left by larger lenders. Some offer fast access to cash, but beneath the surface, their interest rates are so high they will inevitably cause an already weakened swimmer to drown under the additional debt burden. Have they helped the problem? Almost certainly some have, certainly in terms of addressing short-term cashflow needs. Are they solving the problem? Not really. The core issue of late payments will have to be addressed by government and regulators in due course.

The ATO will need to do more to educate small business about how they can help. In the meantime, the role of advisory services and prudent lenders in educating their clients about funding their businesses in a sensible way is more critical than ever.

As we swim out and greet 2020, will you be swimming responsibly between the flags or are you already a little out of your depth? As a sign of our commitment to small business, and staying afloat generally this summer we will donate $100 to Surf Lifesaving Australia, from each SME loan made to a financial planner, mortgage broker, accountant or property manager.

Whether you’re a mortgage broker, financial planner, rent roll business owner, accountant or other cashflow business, we can understand and support your specific business goals and needs.

Contact us

Suite 401, Level 4,
59-75 Grafton Street,
Bondi Junction NSW 2022

1300 139 003

info@trailblazerfinance.com.au

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