Small Business Restructure: A Successful Turnaround for a Group of Takeaway Shops

The Initial Engagement

Approximately a year ago, a director from a well-known group of takeaway shops, operating in Brisbane, was referred to us. They had recognised growing tax debts across their group of businesses and sought advice on possible solutions.

We sat with the director and their accountant to review the group’s structure, including eight companies.

After a detailed analysis, we determined that five of these were ideal candidates for a Small Business Restructuring (SBR), a still relatively new type of administration designed for businesses with debts under a million dollars, good lodgement history, and no outstanding superannuation.

The businesses were fundamentally sound, but carrying legacy tax debts they couldn’t shake off.

Challenges in Group Restructuring

Managing a group restructure presented advantages and challenges. On the positive side, dealing with a single director, accountant, and tax office representative was efficient.

However, the real complexity came from significant intercompany transactions, with funds and stock frequently moving between entities to keep the group afloat.

It made for a complex financial picture. We had to dig to see the real financial position clearly.

We spent considerable time reconciling these transactions, determining what debts should be forgiven, and preparing cash flow budgets to demonstrate the group’s sustainability post-restructure.

The Outcome

We proposed to creditors, predominantly the ATO, offering 20 cents in the dollar. It was a big win: all five plans were accepted, effectively reducing the group’s tax burden by 80%.

This result safeguarded dozens of jobs and allowed the businesses to continue operating in their communities. One of those stores is just around the corner from my place, and I take a little pride every time I drive past and know that without our help, that business might not be there today.

The Importance of Early Action

This case wasn’t about the business making massive mistakes – it was more about the COVID hangover a lot of hospitality businesses have been dealing with.

But generally, the biggest mistake we see is businesses not coming to us early enough. Sometimes, it’s head-in-the-sand, and sometimes, it’s a bit of misplaced pride. Often, people are excellent at what they do – good tradies, good restaurateurs – but they don’t really understand their finances.

There’s a dangerous myth out there that if you don’t lodge your tax returns, the tax office won’t know what you owe. It’s the exact opposite these days. Not lodging gets you into more trouble, not less.

Having a good accountant, a real partner in the business, can make a significant difference. Someone who spots the red flags early and encourages action before things spiral.

Why Small Business Restructure Is a Game Changer

The Small Business Restructure process has become an important part of our practice, accounting for about a third of our matters. It enables directors to remain in control of their businesses during the restructuring, offering a far more positive and constructive outcome compared to liquidation.

Collaboration is Key

While the initial referral came via a solicitor in this engagement, the ongoing collaboration with the client’s accountant was essential. Given the tight 20-business-day timeframe of an SBR, accountants play a critical role in ensuring timely and accurate information is provided which ultimately contributed to the success of the proposal.

The Data Breakdown

Number of Related Companies: 5

Industry: Hospitality

Total ATO Debt across all five businesses: $1,397,269

Other Debt: $369,729

Total Creditor Debt: $1,766,998

Savings on ATO Debt: $1,117,816

Savings on Other Debt: $295,783

Total Savings: $1,413,599

Amount paid in total: $353,399

Accepted c in the dollar value: 20c per SBR

Number of Jobs Saved: 42 (from the age range of 14-40 years old)

Talk to us today about how Small Business Restructure can help.