SERVICES & ADVICE
DEBT LIFELINE FOR STRUGGLING BUILDERS AND TRADIES LEGISLATIVE CHANGES MADE IN 2021 BY THE FEDERAL GOVERNMENT TO HELP SMALL BUSINESS WITHSTAND THE IMPACT OF COVID, ARE NOW PROVIDING A MUCH-NEEDED LIFELINE FOR BUSINESSES STRUGGLING WITH AN OVERHEATING BUILDING SECTOR.
T
he Small Business Restructuring Process (SBRP) is designed to provide financially distressed small businesses with access to a single, streamlined process to restructure their debts while allowing owners to remain in control of their business. A far more favourable option than the traditional insolvency process, the SBRP has four major advantages: 1. There is no requirement to hand the business over to an administrator. This means the business owner stays in control and can continue to make every day operational decisions. 2. Administrative and legal costs are significantly lower than traditional insolvency action.
TO BE ELIGIBLE FOR THE SBRP THE BUSINESS MUST: •
Be an incorporated company – i.e. Trusts, partnerships and sole traders are not eligible.
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Have total liabilities which do not exceed $1 million on the day the company enters into an SBRP – this excludes employee entitlements like Super.
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Be likely to either be insolvent or become insolvent soon.
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Appoint a SBRP practitioner to assist in the process, including documentation of debt restructuring plan and restructuring proposal.
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3. In contrast to other insolvency action, the QBCC do not see the SBRP as a trigger event for licence cancellations or exclusions. 4. With the assistance of a SBRP practitioner, an effective debt restructuring proposal can result in small businesses negotiating a compromise with creditors that is not only formal but also relatively favourable.
Have all tax lodgements up to date -i.e. activity statements and tax returns all lodged on time. The tax debts do not need to be paid to enter into a plan but must be lodged.
WHAT DEBTS CAN BE INCLUDED IN THE SBRP? •
Any unsecured debts incurred prior to the commencement of the SBRP
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Employee entitlements due either prior to or following the SBRP (super, leave, long service leave, etc) cannot be included in the plan. These debts and any other debts incurred during and after the SBRP must be paid outside the plan.
WHAT IS THE PROCESS FOR IMPLEMENTING AN SBRP? •
Before implementing a debt restructuring plan all current employee entitlements, particularly superannuation, must be paid and ATO lodgements must be up to date.
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The business must engage a qualified SBRP practitioner to design a debt restructuring plan and proposal to be presented to creditors.
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More than 50 per cent in value of creditors must vote in favour of the plan for it to be adopted.
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Once the plan is accepted, payments will be made to each creditor at the same time, at equal “cents in the dollar” amounts until all obligations are paid under the plan.
TO FIND OUT MORE ABOUT THE SBRP, CALL XACT ACCOUNTING ON 07 3124 8680 FOR A FREE CONSULTATION.
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