Businesses struggling to keep on top of the incoming bills may be surprised to learn that suppliers are not the most aggressive instigators of company wind up proceedings.
According to data compiled by Prushka Fast Debt Recovery, banks and other lenders also do not get a look in when it comes to the most petitions for insolvency.
Leading the charge on pursuing insolvency as a means of debt collection, says Prushka CEO Roger Mendelson, is the government.
Mr Mendelson says that 46 per cent of petitions to wind up companies between November 2016 and June 2017 came from the Australian Tax Office (ATO), and a further 19 per cent came from other government agencies.
The reason for the government’s zealous approach to winding up debtors, Mr Mendelson says, is a little-known rule about undefended claims.
“Wind ups can occur quickly particularly because there is a process to liquidate companies without judgment on undefended claims over $2,000,” he says.
“Many business owners underestimate the cash flow challenges they face and can easily come unstuck. BAS (business activity statement) is so important because the payments aren’t simply tax instalments; in most cases, they include employee PAYG (pay as you go) instalments and withholding tax, as well as GST (goods and services tax).
“[As such,] it is critical that businesses maintain their BAS payments or risk facing major penalties. While the ATO will work to help those genuinely making an effort to meet their obligations, they will come down hard on anyone consciously avoiding paying.”
Gess Rambaldi, a partner in business recovery and insolvency at accounting and audits firm Pitcher Partners, warns that the ATO has become much more sophisticated in its debt recovery processes, which include pursuing company insolvency proceedings.
“Since reaching the peak of corporate insolvencies during the GFC (global financial crisis), the rate of wind-downs has been relatively stable; however, ATO-led insolvencies have increased proportionately,” Mr Rambaldi said.
“The ATO has certainly become more diligent since the surge in insolvency work caused by the GFC, not only increasing its involvement in wind-downs, but also investigating phoenix activity, being more vocal on insolvency issues in the industry, and implementing a range of policies concerning its participation as a model litigant and as an active creditor in insolvency administrations.”