Tax office abandons SBR as director disputes demand

Based on the most recent available figures, the Australian Tax Office (ATO) is the major creditor in 80 per cent of Small Business Restructurings (SBRs) and is inclined to support the proposals in a majority of cases.

When that acceptance is refused it’s worth understanding why. Exceptions generally prove the rule.

In the case of Blue Zebra Digital Pty Limited (BZD) the exception is in clear view thanks to a dispute between BZD’s controller and the tax office being litigated in the NSW Supreme Court.

The dispute, or at least its most recent iteration began in an orthodox manner with the ATO issuing a statutory demand for payment of a tad under $220,000.

BZD then commenced proceedings to rebut the demand. But once those proceedings were on foot it engaged Chifley Advisory’s Gavin Moss as a Small Business Restructuring Practitioner (SBRP) following a referral from Andrew Stark’s Wisdom Business Consultants.

The plan proposed was that BZD would pay $74,000 via 24 contributions of $3,100 per month, commencing on August 24, 2023.

Given that BZD had also commenced proceedings to rebut the statutory demand, offering what on the face of it is a heavily discounted instalment plan seems odd. Certainly the only creditor of any substance saw it that way.

Moss accepted the engagement in June of this year. Last week he lodged the necessary documents with ASIC to indicate that the proposed restructuring had failed to gain acceptance from creditors.

The reasons why weren’t disclosed but it’s a fair bet the tax office wasn’t prepared to accept the unsecured promise of $75,000 over two years when it’s already owed $220,000 and there is some history of disputation between it and the company.

Despite the knock back Moss remains sanguine about the SBRP process, referring to the generally positive statistics published by ASIC in January this year and telling iNO that in his view the regime will gain greater acceptance as accountants advising distressed clients became more familiar with the process and realise that the ATO is generally in favour.

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