When COVID hit Australia in 2020, there were common fears about the economic impact arising from the health crisis.
Within the business turnaround and distress industry, there was widespread commentary about the tsunami of corporate insolvencies to come.
That enthusiasm hoping for plentiful work dampened over time as Government stimulus was introduced and the major creditors in the economy (the Australian Taxation Office and the banks) decided not to pursue debt.
The Government also introduced statutory protections and moratoriums, which left Australian businesses in a better position than previously.
Optimism has greeted us moving into 2021 with unexpected enthusiasm for and growth in specific industries/sectors. Despite the virulent Delta strain and continuing Regional/State lockdowns, the economic environment continues to be quietly optimistic, with a crash mostly avoided. Insolvency appointments continue to track well below previous years with only modest expectations of increases over 6 to 12 months.
The hope was that the world was opening up as we sought out the “new normal”.
However, the disaster of the vaccine rollout and the efficiency and urgency shown by other countries in their vaccine programs has meant we are largely behind where we might have hoped to be and where other countries currently are.
Delayed payment arrangements for Business Tax Debts
One side effect of the Government stimulus and protections and the Australian Tax Office appetite for delayed payment plans is that the reduced burden of tax debt payments have allowed businesses to pay down other creditors and free up cash flow. Many businesses that were already having difficulties could survive much longer due to the stimulus offered. However, they now need to consider whether they can make it back or need to close.
Business Tax Debt and the Federal Election
With a Federal election required before May next year, it might cynically be suggested that no Prime Minister would set the Australian Tax Office loose on collecting debts. It will cause further small business financial hardship and threaten its election prospects.
There has been a contrasting difference between where the benefits and losses have landed. For every café or pub, or sporting club in the hospitality, arts or recreation industry that relies on people in attendance has been severely challenged, there is a retail/online retail, construction, commercial transport or logistics business experiencing their strongest period ever.
Those businesses which are doing well will have greater results as market confidence grows. Demand is currently high, which is a positive factor however, the continuing reliability and timing of supply chains, particularly international, will be crucial.
Uncertainty doesn’t play well for sole traders and small business
The pandemic has been going long enough that while previously “we were all in this together” there are differences apparent.
The inertia of the Federal Government has caused uncertainty in the vaccine rollout and international quarantine facilities. The fragility of the new four-stage plan from the Prime Minister and his inability to make real progress past a media conference belies any confidence.
Know your cash position and options
With uncertainty on the immediate business horizon, the more financial problems there will be for small businesses. Knowing your cash position and options to flex out and grow will provide comfort and confidence. Moreover, it will provide hope for the future and a plan to work to.
This time is the perfect opportunity to consider a business turnaround process for your business.
Worried about paying your tax debt?
Get help today
We can help. Start with a no-obligation chat with a financial councillor about where your business sits right now and how we can plan to turn around your business.
In one hour, you can have a much clearer view of your business’ possibilities and how we can plan a turnaround.