One issue that can greatly complicate things is if the executor of the Will dies or is incapacitated. Not having an executor can complicate things and has the potential to lead to court proceedings.

The last thing you want is difficulties in dealing with your Will for your bereaved loved ones. You want the Will to be the last thing they have to worry about at such a sad time.

So, what will happen if an appointed executor is unable to fulfil their duties in handling a deceased person’s estate?

What is an executor?

An executor of a Will is the person appointed to administer the estate of the deceased.

Basically, an executor is a party charged with carrying out the instructions of a Will.

What if the executor dies?

An executor can die at two different times during the lifetime of a Will, and each situation creates its own problems.

If the executor dies before the maker of the Will or is not available

When you appoint an executor, you clearly expect them to outlive you. However, this might not be the case. It may also happen that they are not able to execute your Will for another reason such as distance or mental impairment.

The best thing to do from the outset is to appoint one or more backup executors.

If you have yet to appoint backup executors and your executor dies before you, it is best to update your Will right away with a new executor.

If you don’t appoint a new executor, another party can apply to the supreme court to become the executor. The court will normally agree to a person with a large interest in the estate becoming the executor, but it will be out of your hands and may not end up being your preferred person.

The executor dies shortly after the Willmaker

This is a more complicated situation.

Of course, if you have appointed backup executors, then the job will go down the line to the next surviving executor.

If there is no executor, then someone will need to apply to the court for Letters of Administration With the Will Annexed.

These documents will grant the applicant the authority of an executor.

Normally, the court expects that the applicant is a beneficiary of the Will, has the written consent of other beneficiaries and that the Will is legal and current.

Protecting your Will and your loved ones

There are a few tips for getting your Will right and ensuring you have no trouble with your executor:

• Appoint more than one executor: Have a preferred and a backup executor so there is less stress caused by an executor not being available.
• Review your Will regularly: You may have done your Will long ago and need to remember who you appointed as your executor. Conduct an annual review to ensure your Will is always up to date. You can confirm your executor is alive and well as part of this process
• Make sure your Will is correctly drafted: Work with a legal professional to ensure your Will is valid and has been signed by the right people, including your executor.
• Speak with your executor or update the executor: It’s worth touching base with your Will’s executor from time to time to ensure they are still comfortable with their role. If they aren’t or if you would prefer to have someone else do the job, find someone else and complete the necessary paperwork.

Is your Will up to date?

Having your Will professionally prepared and kept up to date by a lawyer who specialises in this area makes sense, particularly if your Will and estate are more complex.

When you have an up to date and legally binding Will as well as reliable executors, you will have peace of mind about your family being protected and provided for in the event of your death.

Give yourself and your family peace of mind. Reach out to Legal Affairs Lounge to start preparing your Will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

To help you nominate the right person, here’s a rundown of what a Will executor’s tasks include.

What do executors of Wills do?

The executor of a Will has to:

• Administer your estate after you pass away
• Ensure all debts are paid
• Close your accounts
• Oversee the disbursement of inheritances in accordance with your wishes

It is also usually the executor’s job to arrange your funeral. They can use funds from your estate to pay for it.

The Will executor may need to go through the process of probate. This is a court order granted by the Supreme Court of Queensland that confirms:

• the Will is valid
• the executor has permission to distribute the estate

Probate is usually required if you leave behind property and a substantial amount of money. Grants of probate usually take around 20 business days and the process includes:

• gathering supporting documents such as an affidavit
• publishing a probate notice
• waiting 14 days
• submitting a probate application
• responding to Requisitions from the court.

After probate is confirmed, the person responsible for executing your final wishes and finalising your estate will have to answer the following questions:

• What do you wish to happen to your remains?
• Who needs to be notified about your passing?
• What will happen to your property and belongings?
• Who is entitled to what percentage of the money that comes from the sale of property and other assets / who are the will’s beneficiaries?
• How will belongings and funds be distributed?

Your executor will ideally have access to your accounts after you pass away. If you have a list of providers for them to get in touch with, they will find the process much easier. Consider your:

• Phone and internet provider
• Gas/electricity provider
• Insurance providers
• Subscriptions (e.g. Netflix etc)
• Gym memberships
• Housekeeping services etc

Think about bank, superannuation and investment accounts as well; it can take a long time for your executor to access accounts (executors generally can only access your bank accounts once probate has been granted by the Court.)

Ask your lawyer to hold onto these details for safekeeping.

Who should execute your Will?

Being executor of a Will can be stressful and time-consuming. When you nominate someone, keep this in mind.

Most people choose a family member or trusted friend. Sometimes, two people are nominated, either to execute the Will together or as an alternative if the first choice is unavailable or incapable of taking on the responsibility.

Often, siblings are nominated as joint executors. This can help ensure everything is kept ‘fair’ during the Will execution process.

Some things to consider include:

• You can nominate someone who is a beneficiary
• You can add a clause to your Will to ensure your executor is compensated for their time and efforts
• If you appoint joint executors, make sure they are able to work well together
• You can nominate a lawyer or trustee instead of a family member. Usually, payment for their services will come out of your estate but make this clear when you ask them to act as executor, so they don’t come up against pushback from your family.

If you do nominate a family member, they can work in conjunction with a solicitor to ensure they get everything right.

Make your executor’s life easy

A rushed or unclear Will can make things very difficult for an executor. The more questions you can clearly answer in your Will, the better.

Write down your wishes in a formal Will, store relevant information safely with a lawyer and have everything prepared formally and correctly so you don’t create unnecessary stress for your executor when the time comes.

The right approach to Wills and executors will give you and your family peace of mind. Reach out to Legal Affairs Lounge to start preparing your will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Here is an explainer, as shared by a Legal Affairs Business Lawyer.

What is a Director Penalty Notice (DPN)?

A director penalty notice is issued by the Australian Taxation Office (ATO) to the director of a business that has failed to pay its tax bill (usually three months or more after the due date) or has not filled out the business’ Business Activity Statement (BAS) on time.

The DPN will tell the business director how much is owed and provide available payment options or other methods to resolve the matter.

It will also outline a new timeline for making repayments. Generally, it will present you with one of two conditions:

• A lockdown DPN: This will make you, as the Director, immediately financially responsible for repayment.
• A set time period to repay: In this instance, the most common time period is 21 days to make the relevant repayments.

What makes a DPN different and extremely important for company directors to know about is that it makes the director directly responsible for tax liabilities. That means that you, as the director, have to find the money or you will face consequences. The notice is arranged this way to ensure that company directors don’t simply dissolve companies to avoid tax debts.

You should also take note that a DPN is valid from the time it is delivered to either the registered business address of your company or your residential address. If you have recently moved, it makes no difference, the date it arrives at your previous address still stands.

Even if you are a former director and have left the company with the overdue tax debt, you could still be liable for the repayments. As a new director who has been in the role for more than 30 days, you may also be held personally responsible for unpaid tax money.

How to deal with a DPN

If you have received a DPN, don’t panic. There are still ways to resolve it.

The first and most obvious is to pay the debt in full, straight away. Maybe you just didn’t get around to paying the bill, or it got lost in a pile of paperwork. Pay it off ASAP and you can move on.

If it’s not feasible to pay the whole bill in one go, contact the ATO right away or ask your Legal Affairs business lawyer to do so on your behalf. More often than not, the tax office will allow you to pay the bill over time using an instalment plan. But before you do, you must get expert advice. If you enter a payment plan, your personal liability does not go away and there will be serious consequences if you chose this path and can’t meet the payment obligations.

Your other options are to:

• Put your company into administration or liquidation
• Work with a professional to restructure your business.
• Present the ATO with a valid reason for late payment

If you can convince the ATO that you had legitimate reasons for failing to pay, like serious illness or some other unavoidable issue, they might relax the DPN. You will still need to pay the money owed at some stage, though.

If you don’t take any of the steps above, you will become personally liable to repay the amount owed in full, and unfortunately, time is not on your side.

When it comes to DPNs, prevention is always better than cure. If you have a good accountant and bookkeeper, they should be able to help you ensure your tax-relevant payments are up to date.

What to do if you receive a DPN

The most important thing to do if you receive a DPN is to act quickly.

Get your paperwork in order as much as you can, then contact your Legal Affairs business lawyer and accountant as soon as possible. They will sit down with you to help work out the most suitable solution.

Need to know more about DPNs? Contact a Legal Affairs business lawyer today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

One question we are often asked about at LAL is how tax applies on the sale of a business. There isn’t a black and white answer, but this article will give you an understanding of how it all works.

Paying tax on a business sale

The sale of a business is counted by the Australian Tax Office as part of the business’s taxable income. Think of it as your parting ‘gift’ to the tax office!

The tax rate you pay on the sale of your business depends on the form it takes, with the two most commonly sold structures in Australia being sole traders/trusts and companies.

• Business sale tax for sole traders and trusts

For sole traders and trusts that distribute to individuals, the amount of tax you pay depends on the value of the business at sale. The tax rate is separated into two brackets:

• $90,001 – $180,000: a rate of $20,797, plus 37% on every dollar over $90,000
• $180,001 and above: a rate of $54,087, plus 45% on every dollar over $180,000

Both brackets also incur the Medicare levy fee of 2%.

• Business sale tax for companies

Tax on companies is usually between 25% and 30%, depending on base entity rules.

Capital Gains Tax

Capital Gains Tax (CGT) applies to the sale of all businesses in Australia, regardless of structure because a sale is regarded as a capital gain.

The ATO considers capital gains to be any profit that your business brings in by selling assets. CGT is the tax the ATO charges on that profit.

Therefore, selling a business for more than it was bought for is a capital gain and will be taxed.

Capital gains tax will vary depending on:

• The initial cost of establishing the business
• The sale price
• The businesses tax structure
• Possible tax concessions
• Total income earned over 12 months

Minimising your tax bill

As inevitable as taxes are, there are always ways to make sure you don’t overpay.

Small businesses have the most options available to apply for tax concessions. The ATO classes small businesses in Australia as:

• Having an annual turnover of less than $2 million
• Having net assets worth less than $6 million

If you are a small business, there are a number of concessions you may be able to apply for, including:

• 50 per cent capital gains tax reduction: If you have owned your small business for more than 12 months, you may be eligible for this deduction.
• 50 per cent active asset capital gains tax reduction: An active asset is an asset that has been in use for more than half the time that a business owner has owned them. A business clearly falls into that category, so falls into the eligibility for the 50 per cent active asset capital gains tax reduction.
• 15-year capital gains tax exemption: If you are over 55 and have owned the business for over 15 years, you may be eligible for a complete exemption if you are selling to retire.
• Retirement exemption: You can ignore up to $500,000 of the capital gains tax incurred if you are retiring. If you are under 55, you must place the capital gain amount into an allocated superannuation fund.
• Small business roll-over capital gains tax exemption: It may be possible to roll your capital gains tax over to a new asset. You even have two years to find the replacement asset.

Your lawyer and accountant can help you understand which of these you may be eligible for.

Asset sales or share sales

When you sell your business, you have the option of doing an asset or a shares sale:

• An asset sale means the sale of the entire business, including all physical assets.
• A shares sale is when you sell off enough company shares to move ownership to another business entity.

The best solution

You will always pay tax on a business sale, so the best way to make sure you don’t pay incorrectly is to seek professional help.

An experienced lawyer and accountant will help you understand all the options above so you can structure your business correctly to sell it. This may require several months or even years of planning but it will be worth it.

Don’t forget, there are many other steps involved with selling a business beyond being aware of tax. Your accountant and lawyer can help you ensure it is in great shape so you can sell quickly, easily and for a great price.

Need help to sell your business and maximise your profits? Contact LAL Law today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Many business owners assume that becoming insolvent means liquidating. When this happens, a liquidator is appointed to sell off assets and repay debt, and the company must stop trading while this all takes place.

The good news is there are alternatives, and you can solve insolvency without liquidating. Here’s a rundown of your different options to resolve your situation and stay in business.

Pay your creditors

If you have fallen behind but the business is turning around, you may be able to arrange to repay the providers you owe money to. You could take out a loan or you may be able to negotiate a payment plan with the tax office (be aware you may be charged interest on your tax debt).

With the tax office, it’s essential you reach out and set up a payment plan before you start receiving penalty notices as a result of not paying your bills.

If you decide to take out a loan to repay your creditors, make sure you can make the repayments before you commit. You may be able to secure the loan against some assets, which will minimise the risk for both you and the lender.

Find a way to consolidate your debt

Speaking of loans, if you have several different accounts and credit cards that are overdue, a loan from the bank or another lender may make everything more manageable and lighten the load thanks to a lower interest rate. This might be a good time to review your current credit situation with a finance broker.

Raise capital

If an injection of funds will put things on the right track, you may be able to ‘lend’ to the business from your personal funds or find an investor who is willing to contribute financially in return for part-ownership or other compensation.

With this being said, you need to have confidence that you’re not just digging a deeper hole for yourself. Work with your accountant and financial planners to do some forecasting so you have an idea of what’s actually possible.

Did you know Apple was on the brink of bankruptcy at one stage? It was Microsoft that saved the day, by investing quite a few million.

Review your income and expenses 

It is very easy to say ‘just earn more money’ but a lot less simple to do so. However, with a combination of strategy, great people, good market knowledge and a product or service people want, you can reinvent your business model and get back on top.

You may need to do some deep diving into your finances to figure out what has gone wrong. There could be expenses you can eliminate, and you might have to let some people go but recovery is never impossible. Sometimes growing the business is not profitably and scaling back will help increase profits.

Marvel was in a terrible position in the late 1990s before it started making movies off the back of its popular comic book titles. Its partnership with Disney means it’s one of the most successful brands in the world.

Find a buyer

Many brands avoid going from insolvency to liquidation by selling to a larger company. This may be an option, especially if you have IP or products that are in demand.

If you decide to sell to cover the cost of your debts, you don’t necessarily have to do so at a ‘bargain basement’ price. Work with a legal and accounting team so you sell for fair value and do so in accordance with the law.

The benefit of selling your business is being able to repay your debts while your staff keep their jobs. The purchaser will take the responsibility of restoring client relationships and getting cash flow back in shape.

Make sure you discuss your Capital Gains implications with your accountant prior to any sale.

Solving insolvency without liquidating

The best thing to do if you’re facing overwhelming business debt is to get the advice of a professional. A specialist insolvency lawyer can help you explore every option, make the right decisions and come up with a plan so you can side-step liquidation.

Need help to make a call around insolvency and liquidation? Reach out to Legal Affairs Lounge today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Take a look at some of the options and steps involved with the insolvency process if you are a business.

How do you know if you are insolvent?

The signs you are insolvent are:

• If the number of overdue bills keeps building rather than dropping
• If the total of your business debts is higher than the value of the assets, you own
• If your sales figures and profits have been on a downward trend
• If you don’t have the cash flow to cover your regular expenses
• Your financial team is continually receiving phone calls and letters of demand from creditors

In some circumstances, multiple creditors may take action against a company that doesn’t repay its debts. This can result in what’s known as compulsory liquidation — and an order is issued by the court as a result of the creditors’ actions.

Otherwise, the company’s directors can start the insolvency process themselves, if they feel they need help to take stock of the situation and bring things under control.

Being insolvent doesn’t necessarily mean the end of the business. The first and most important step is to engage a team of legal professionals who are experienced in insolvency and can guide business directors through the process. Once someone is on board to help with the relevant steps and paperwork, here are the potential steps to move through:

Voluntary Administration

When a company goes into voluntary administration, the directors hand control to external administrators who start investigating financial details and working out how to deal with creditors. These experts are sometimes referred to as insolvency practitioners or receivers.

The company can continue trading during this time but there has to be a formal admission to the Australian Securities and Investments Commission, which will make a note that the company is in administration.

Once the administrators have completed their investigation, there will be a clearer picture of whether it is possible to pay creditors and move forward, or if liquidation is the best next step.

Receivership

If debts can be restructured, payment plans can be arranged and assets sold in order to pay off the creditors, or if the company can be acquired by another entity, it may be possible to get back on track and continue trading.

In these circumstances, a receiver is appointed to oversee the management of assets, potentially restructure the company and help take care of financial obligations.

Liquidation

The insolvency professionals you work with may determine liquidation as the best course of action if there is no way to escape the financial difficulties the business is facing.

Liquidation is also referred to as “winding up”. As part of this, items of value (assets) are sold to help repay debts, the company is closed, and it stops trading.

How to recover from insolvency

Recovering from insolvency is possible and many Australian companies have been able to do so. A positive outcome often depends on taking action sooner rather than later.

To avoid the threat of insolvency, careful financial management and a monetary ‘safety net’ are essential. It makes sense to work with a good accountant so you can be aware of spiralling costs before they are out of control.

Would you like more information about the steps to insolvency, contact Legal Affairs Lounge today to discuss your options.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Trademarking can be complex and it makes sense to complete the process with the help of a legal professional who understands how it all works.

Wondering how to trademark and why you need to? Here are some essential facts.

1. Why trademark?

Businesses brand themselves so they can be easily recognised and stand out from the competition. The trouble is it’s simple for someone to look at what you’re doing and then copy it.

Trademarking gives you ‘ownership’ of a phrase, logo, image, brand name or even a scent and prevents others from replicating what you do in order to make money.

For example, the phrase ‘I’M LOVIN’ IT’ is trademarked by McDonald’s. Paris Hilton trademarked the expression she became known for; “That’s hot”. This doesn’t mean nobody is allowed to say those words out loud… just that they can’t be used for commercial purposes. The lighting on the Eiffel Tower is trademarked so people can’t sell images of it lit up at night. And athletes are officially prevented from copying sprinter Usain Bolt’s signature victory pose.

If you forget to trademark, it’s possible for someone else to trademark your name/logo etc and then take action against you, even though you were the first to market.

2. Not everything can be trademarked

For example, you can’t trademark the word ‘lawyer’. It is far too broad and there are other operators who have the right to use this term.

When you go through the trademark process, you’ll first need to make sure what you want to trademark isn’t already protected from use by someone else. Many businesses have gone a long way down the branding path before they realise they can’t use the name or slogan they want.

With that being said, if you find a trademark similar to yours, you might still be able to claim it for yourself — if your business is very different. For example; Straight Line Graphic Design vs Straight Line Business Coaching. These businesses would not compete with each other and therefore may both be able to apply for a trademark around the wording ‘Straight Line’.

Facebook has trademarked the word ‘face’. However this only applies to social media companies that may be considered competitors.

3. Trademarks aren’t automatically approved

The trademark process involves application, review and approval. You may be asked to provide evidence that you require the trademark and you may need to supply a logo as well as a business name, plus additional information about your business and what you do.

There is also a period where other operators have the right to object to your trademark before it is finalised.

Because the process takes a while and involves a review process, there are costs involved. You’ll have to pay to apply for a trademark and to register it.

There are also costs involved with engaging a lawyer who knows how to trademark. However, when you consider that following the process correctly can save your business from being eclipsed by a competitor, it’s worth the money.

4. Trademarks expire

Businesses come and go and trademarks don’t last forever either. Generally, the validity of a trademark is ten years from approval.

5. Trademarks aren’t patents (or copyright)

Trademarks protect a name, logo, jingle etc that separates your brand from other operators and gives you the rights to use it exclusively.

A patent is more around a concept or invention. You may come up with a new computer program innovation and patent it so that nobody can take it to the market before you.

The term copyright covers the content your business creates. For example, if you write a guidebook, it counts as original work and can’t be recreated by others.

Need help to figure out how to trademark? The team at Legal Affairs Lounge will help you figure out if your application will be approved and streamline the experience so you can focus on other things. Reach out to us today.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

If someone close to you has died and you believe the Will to be unfair, there may be legal steps you can take to claim money or assets from the estate that you are entitled to.

To find out how to dispute a Will, the first step is to find a legal professional who specialises in this area and believes you have a case. There are specific scenarios under which you may be entitled to a share of a deceased person’s estate.

Take a look at some tips and information from our Legal Affairs Wills specialists:

When can you dispute a Will?

The first step is determining if you are eligible to make a claim. Legal Affairs Lounge Will and Estate Lawyers may advise you to proceed with your claim if:

• It has been less than twelve months since the person passed away.
• You believe the testator (the person who made the Will) did not have the mental capacity to understand what they were doing when they made the Will (you are likely to need medical records to help prove this).
• You believe someone has exerted pressure on the testator to make a Will that was not in their best interests.
• You believe the Will is not valid because it has been forged, or someone has lied to the testator about the contents of the Will.
• You believe the testator did not understand or approve of the contents of the Will.
• You are a close relative of the deceased such as a sibling, parent or child, or you are related to them by marriage.
• You are a grandchild of the deceased and you were dependent on them.
• You have a relationship of significance with the deceased such as a de facto partnership.
• The Will was not signed correctly or was not documented property (e.g. nobody has witnessed the Will being signed)

The steps to dispute a Will

If you want to dispute a Will in Australia and you have professional advice saying your claim is valid, you’ll need to follow some specific steps.

First, you’ll need your lawyer’s help to file a family provision application with the court.

Next, you’ll need to attend a directions hearing.

After that, there will be mediation between you and/or your representative, and the Will’s executor.

If the issue cannot be resolved through mediation, you may need to go to court, where a decision will be applied that reflects the laws around Wills and estates.

Finally, if the dispute is not resolved after the above steps, you have the option to appeal the decision.

The above may sound simple but it will take a lot of work to prepare your notice of objection and be ready for hearings.

If your matter does reach court, the decision will be based on factors including:

• Whether or not the Will is ‘fair’
• If it is reasonable to assume you should have been provided for in the Will
• The intentions of the testator and their mental capacity at the time the Will was created
• The level to which you were dependent on the deceased
• The evidence you are able to provide to back up your claims

It’s important to have a good Wills and Estate lawyer when you’re disputing a Will, because the process is complex. An experienced lawyer will be able to help you navigate the process and give you the best chance of success.

Before you decide to proceed, you need to weigh up whether the cost of disputing the Will could outweigh the funds you receive at the end of the process (*sometimes the estate will pay your legal costs). Ideally, you will be able to settle with the other beneficiaries or the executor via mediation rather than going to court. This will allow you to reach an outcome that suits everyone, rather than a verdict being handed down by a judge.

If you’re thinking of disputing a Will and you’re based on the Legal Affairs , contact Legal Affairs Lounge today to discuss your options.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

However, with the severe impacts of COVID diminishing, the Australian Tax Office is taking steps to start reducing the many billions (yes, billions) of dollars in tax debt. It will be looking to individuals, corporations and small businesses to recoup outstanding amounts.

As part of this, major credit reporting agencies have signed agreements with the ATO. The result of these agreements is that companies including CreditorWatch and Equifax will now be able to access and report tax default data.

What this means

Credit reporting companies are relied on by mortgage brokers and lending institutions like banks who want to assess an individual or business’s suitability for a loan.

These companies keep a ‘score’ on consumers and businesses, based on the amounts they owe, how many bills they have overdue and how often they make payments. When you apply for a loan, your credit score factors into the decision.

In the past, tax debt has not been included in credit scores. But this has now changed.

If you are a business owner who:

• Owes more than $100,000 in tax
• Has owed this amount for more than 90 days
• Is not engaging with the ATO to manage your tax debt
• Doesn’t have an active complaint with the Inspector-General of Taxation Ombudsman (IGTO)

It’s more than likely that lenders will be notified when you apply for a loan.

The types of business tax debt that will be captured into the tax debt disclosure threshold include:

• Income tax debts
• Activity statement debts
• Superannuation debts
• Fringe benefit debt
• Penalties and interest charges

As shared by Accountants Daily, “Equifax’s general manager commercial and property services Scott Mason said the data would be incredibly valuable to customers because tax debts were often the last “bill” that businesses paid.”

He added that, “Understanding a company’s tax information is a vital piece of the puzzle for organisations wanting to manage their credit risk in relation to new and existing customers.”

It does make sense for lenders to have access to a complete picture of existing debt when it comes to approving loans. Being better informed will reduce the risk of defaults and businesses ending up in additional financial strife.

What to do next

If your business has an outstanding tax debt of over $100,000 and you have been investigating the possibility of a loan, there are a few steps you can take.

If the amount you owe can’t be changed, you’ll need to engage with the ATO to work out a payment plan. Legal Affairs Lounge can negotiate this arrangement for you.  Having a plan in place will prevent the ATO from repeatedly following up with you, and you won’t end up with a default on your credit score.

Often, the ATO will treat tax debt like a loan. It will charge interest but be ok with you making monthly repayments. The challenge for you as a business owner is ensuring you’re not ‘kicking the can down the road’ and accumulating more tax debt while you try to pay off the outstanding amount. Again, having a good accountant can help you avoid this problem.

If your tax debt is out of control, you may need to investigate a restructure. The team at Legal Affairs Lounge can help you figure out the best way to reshape your business so your creditors are satisfied and you can continue to operate.

Don’t let tax debt impact your business. Get in touch with our team today.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

There are a number of debt recovery options available to businesses in Australia. The most appropriate option will depend on the amount of debt owed, the debtor’s financial circumstances and your own business’ needs and preferences.

Take a look at some of the initial steps you can take, as shared by Legal Affairs Lounge’ team of debt recovery lawyers on the Legal Affairs :

Negotiate with the debtor

First things first, reach out and have a discussion. There may be a solution you can find between the two of you.

If you are considering negotiating with a debtor yourself, there are a few things to keep in mind. It is important to be firm but fair and to have a clear understanding of your legal rights as well as the debtor’s financial circumstances.

It’s better to be assertive, not aggressive. It is against the law to use intimidation tactics or threaten someone because they owe you money.

Send a letter of demand

You should first try to negotiate a payment plan or settlement. You could perhaps have your accountant or bookkeeper reach out on your behalf, or phone the account manager yourself to try to recover the funds.

If this doesn’t get results, you may send a letter of demand. The following tips will help you to write an effective letter:

– Make sure you are clear about the amount of money that is owed. Include any interest and legal costs that may be due.

– Give the debtor a reasonable timeframe to pay the debt. This will depend on the amount of money owed and the debtor’s financial circumstances.

It makes sense to work with a Legal Affairs debt recovery lawyer when creating a letter of demand. If the client has the money but is holding onto it, a letter like this can prompt rapid payment.

Apply for a court order

For an amount less than $25,000 your next step is a visit to the Queensland Civil and Administration Tribunal (QCAT). This was established to help businesses recover money owed without losing it to legal support costs.

If the amount is more than $25,000, you will need to work with a lawyer to handle the matter via the Magistrates, District or Supreme court.

Use a debt collection agency

Struggling to recover debt on your own? Working with a debt collection agency may be the best option for you. Your debt collector will follow some of the steps above but because they are familiar with the process they can be much more efficient and persistent.

If you are considering taking action to recover a debt, you should get advice from a debt recovery lawyer first.

If the debtor is insolvent

Many people believe that a company is absolved of its debts if it becomes insolvent or the Directors file for bankruptcy. This is not the case. In fact, part of the process a company must undergo to restructure or become insolvent involves negotiating with creditors. The business may need to sell some of its assets in order to resolve its debts and while you may not get every cent you are owed, at least you can recover some of the money.

It makes sense to work with a debt recovery lawyer if one of your clients is in financial difficulty and going through a restructuring period because it will help you resolve the issue with less stress.

Avoid bad debts

As much as possible, ask your creditors to pay for your services or products upfront. This will save you from having to chase unpaid funds.

In addition to this, make sure you have a clear contract in place or have your clients agree to terms and conditions in writing so bills are not disputed and you have a clear path to a legal claim.

Need help to recover business debts? Reach out to the Legal Affairs debt recovery lawyers at Legal Affairs Lounge today.