Case Study: Ben and Cheryl’s Cleaning Business – Navigating ATO Debt and Personal Liability
The Situation:
Ben ran a cleaning business in Sydney that had accumulated significant debt with the Australian Taxation Office (ATO). The business structure had only Ben as the director.
The Challenges:
- Substantial debt to the ATO, including GST, PAYG, and Superannuation
- Failure to lodge Business Activity Statements (BAS) and Superannuation Guarantee Charge (SGC) forms for over 3 years
- Personal liability for a large portion of the company’s debt
- Lockdown Director Penalty Notice (DPN) for over $268,000 from the ATO
LemonAide’s Approach:
- Assessed the viability of the business without the debt burden
- Guided the process of placing the original company into liquidation
- Assisted in restructuring the business to continue operations
- Advised on personal asset protection strategies
The Outcome:
- The viable business was saved and restructured
- Original company was placed into liquidation to deal with insurmountable debt
- Cheryl (Ben’s wife) purchased Ben’s share of the current and future equity in their house
- Preserved family assets including the business, business assets (primarily cars), and the family home
- Ben entered personal bankruptcy to deal with the lockdown DPN
Key Takeaways:
- Timely lodgement of BAS and SGC forms is crucial to avoid personal liability
- Proper business structuring can help protect personal assets
- Quick action can help preserve business operations even in the face of significant debt
- Professional guidance is essential in navigating complex ATO debt situations
Dealing with ATO debt?
