When the ATO’s sole creditor, SBR practitioners beware

With the kid gloves well and truly off in respect of tax arrears, the number of directors seeking small business restructuring (SBR) protection has surged but it seems that when the Australian Tax Office (ATO) is the only creditor, satisfying the requirements doesn’t guarantee a plan will approved.

In the Federal Court yesterday, an application for the hearing of a winding up application against Octoman Nominees Pty Ltd came before Registrar Geoff Segal.

Craddock Murray Naumann’s Haya Kaiyum told the Registrar that her client wanted to have the application, first filed back on June 8, heard.

The company’s directors however wanted an adjournment and Johnson Winter Slattery partner Ben Renfrey was on hand to advocate for such a course, though he didn’t have much in the way of ammunition having only come into the matter a day earlier.

The court heard that the company had engaged a SBR Practitioner in July but had been “wrong footed” after the tax office last week declared it’s opposition to the plan, which was put together under the supervision of Restructuring Practitioner Stuart Otway of SV Partners.

The rejection however came after the matter had already been adjourned four times and despite Kaiyum’s insistence that the court should favour the plaintiff creditor’s wishes when it was the only creditor the Registrar was so eager to perpetuate the adjournathon that he accepted Renfrey’s statement that it was not immediately clear to him that the CoT is the only creditor.

This it seems was enough for the Registrar to determine that a further adjournment was reasonable and in spite of Kaiyum telling the court her client had “various concerns” about the plan, about which she didn’t elaborate.

What iNO’s gleaned is that the ATO didn’t want to agree to the plan because the directors had been exceedingly lax in filing returns in previous years.

To ensure they were compliant with the requirements for SBR they’d engaged a new accountant to bring the company up to date but the ATO had never wanted to agree to the plan for “policy reasons”, they being the directors’ previous and repeated failure to file returns over many years.

Yet despite this resistance, the ATO waited until the plan was presented to it, thereby increasing costs in a most un-model litigant fashion as the winding up hearing was adjourned for what is now the fifth time. The matter is now scheduled to return to court on October 3.