Structural steel fabricator dodges Tax Debt bullet

Situation

A structural steel fabricator was doing great business – $9M turnover, 30 people in the shop and on site. PLUS $890K in certified claims and retentions. The business was growing, and the profits looked good on paper. He’d turned a profit on every job he’d priced in two years.

BUT he also had a defaulted ATO payment plan.

So he was just three weeks away from the kind of letter that ends a business.

Problem

How did he get there? He’d been funding the gap between invoicing customers and getting paid the way most owners do.

Stretch the suppliers. Then stretch the super. Then, when there was nothing left to stretch, treat the BAS as a line of credit – because it’s the only creditor that doesn’t ring you daily.

That works right up until it doesn’t. The plan defaults, the interest compounds, and the stress skyrockets. Plus, now every conversation with a funder starts from the worst possible position.

His accounts were never the problem. His timing was. The ATO debt was the symptom – not the problem.

Solution

The solution was Invoice Finance (also called Debtor Finance). Because Invoice Finance lenders lend based on the value of unpaid customer invoices and similar pending income such as retentions and certified claims.

We put together a package for invoice finance, secured against certified claims, with retentions and unapproved variations carved out, and the facility sequenced so the ATO position was addressed as part of the arrangement rather than left behind it.

To be straight with you, this WASN’T easy. An existing tax debt makes this harder BUT not impossible. Some ledgers can’t carry it. Fortunately, his business could.

Results

The payment plan was reinstated and met through trading, not hope. Two suppliers reinstated the 2.5% settlement terms he’d lost eighteen months earlier.

𝗧𝗵𝗲 𝗽𝗼𝗶𝗻𝘁

Tax debt in a profitable business is almost never a tax problem. It’s a structural working capital problem that has run out of places to hide. While it feels like the only option in the moment – it’s not. Making the ATO the creditor you stretch first is an existential risk – because when they DO decide to act, you may only get 3 weeks to respond.

The earlier you start a conversation about practical tax debt management strategy, the more options you have. And with today’s range of flexible, affordable 21st century business financing tools you likely have more options than you know.