It's a Broker Thing
It’s a Broker Thing brings you real broker conversations, the kind that happen when you’re talking shop with someone who understands the pace, the pressure and the unexpected moments that come with the job.
Each episode shares stories, insights and practical ideas from people who’ve genuinely lived broking, with honest chat and a few laughs along the way.
This podcast is for general education only and isn’t financial, legal, or tax advice. The guests’ views are their own. Bluestone accepts no liability for errors or how you use this information.
It's a Broker Thing
9. Finding Opportunity With Tax Debt? Yes It’s Possible - with guest, Michael Moon
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With the "ATO under pressure to recover $54 billion in debt”, brokers are seeing tax issues surface in more deals than ever before.
You’ve probably already seen it creep into your own pipeline.
In this episode, Tony MacRae sits down with Michael Moon from Tax Assure for a chat about what’s going on behind the scenes.
They get into:
- The scale of the ATO debt mountain and how it’s playing out for clients
- How the ATO’s debt recovery powers really work (and what that can mean for a deal)
- What to do when ATO debt pops up, and how to get clients moving in the right direction
It’s the kind of conversation that’ll sound familiar but with some practical ways you can handle it next time it shows up in a deal.
If ATO debt has been showing up more in your world lately, this one’s worth a listen.
Tune in to episode nine of Its a Broker Thing
Welcome to It's a Broker Thing podcast, brought to you by Bluestone Home Loans. Each episode we'll dive into market updates, practical insights, and real stories for brokers who want to stay ahead, build stronger relationships and grow their business. Let's dive in. With the federal budget handed down and the ATO under pressure to recover billions, brokers are seeing tax debt issues surface in more and more deals than ever before. On this episode, we'll talk about the current state of the ATO, valuable insights on tax impacts, and we'll even touch a little bit on the federal budget. Joining me for the conversation is Michael Moon, Director at TaxAshore. Michael, welcome to It's a Broker Thing. Tony, thanks for having me here, mate. But before we jump into some of the detail here, I thought it's a good opportunity to give our audience a little bit of background on who Tax Ashore are and what you do and particularly how you help businesses with tax debt issues.
SPEAKER_01Yeah, so thanks. And yeah, we've been around for about 12 years. Um all we do is help businesses and individuals who have debt with the ATO. Broadly we do three things. Every one of our clients has an ATO debt. They've generally come from an advisor, and we get in, stop the recovery action against them, get them into payment terms that they can afford, and where we can reduce the debt by getting rid of rid of the interest and penalties.
SPEAKER_00Sure, sure. So when when I talk to brokers and and just in general, um, there seems to be um a level of confusion out there, particularly in the industry when it comes to how do you engage with the ATO. So what sort of experiences have have you had and and and what can you um you know address as misconceptions that brokers potentially have around this?
SPEAKER_01Yeah, look, I think the main one, I've I've spent the last um number of weeks traveling the country talking to brokers and through broker groups with some of the industry organizations like KAFA, FEAA and so forth. And I guess one of the key messages that we've been trying to get out there is because I as I said I speak to a lot of brokers, and a lot of them think, I've got a client, they've come to me for finance, there's an ATO debt there, it's too hard and I can't do it. And you know, that's not the case. There's almost always a deal there. And so that's one of the things that we're trying to, I guess, dispel as a as a misconception. The other thing that that we do see a lot of is that you know there's a there's a debt there and they're doing some funding, and that's going to clear the debt, so everything's okay. Um and again, big misconception because unless you're managing the ATO along that process, the ATO can come in and actually blow the deal up, and then the broker loses the deal and the the client's in trouble. Um and probably the I guess the final thing I see is is this thing around time. I mean, ATO's traditionally been quite a compliant creditor and it sits there and people say we're hearing nothing from the ATO, so everything's okay. That's when I get nervous. When they go quiet means there is something happening. It's happening behind the scenes, they've stopped engaging, they've stopped talking, and we'll talk later about what I call the four horsemen of the apocalypse. But the things that the ATO can do, that's when those are on the thing. You don't have a lot of time. I used to say to people from start to finish, in terms of a uh, you know, a nasty call or a nasty letter to you're getting wound up in court, you've got 18 months to two years, it's now weeks.
SPEAKER_00So is it fair to say one one thing that we say as a lender is if if if you are in strife, reach out, tell us, let us know early and and we work together. Is the ATO approach similar there?
SPEAKER_01Yeah, absolutely. Absolutely. I think you know I often say to people, if you want to upset the ATO, don't pay them. If you really want to upset them, and I usually use a bit more colourful language in this, don't lodge and don't talk to them and ignore them. Because and it's that's the worst thing, you know, it's the old head in the sand thing, it's the worst thing. They are there, they've got a mandate and what they need to do. They need to collect debt and they need to collect taxes, but they will work with businesses that work with them.
SPEAKER_00Well it's not in their interest to just go hard from day one, is it?
SPEAKER_01Yeah, it's not. It's it's funny, you know, because people often say, look, the ATO, they're there to collect debt. And we'll talk a little a little bit later about what that debt level is because at the moment it's at historic levels. The the actual KPI they have is to get the debt level down. And they can do that in one of two ways. They can collect it or they can write it off. Now write it off means winding the business up. So and they're not like a a normal commercial creditor that says cents in the dollar is better than nothing. They're not allowed to do that unless it goes through a formal administration, but they ha they can't cut a deal, they can't be commercial about it. They've got strict guidelines that they need to meet, uh, and you need to understand what those are and work within those.
SPEAKER_00So I've often heard you say um th the term ATO debt mountain, I think uh think it is. How did we get here and and and and and how has it now become so critical for for lending and for brokers?
SPEAKER_01Aaron Powell Yeah, look, how we got here, and this won't be a surprise to anybody, you know, if we look at what the debt level was prior to I'm going to use COVID as a a line in the sand, because it wasn't just COVID, but it's things that happened. Prior to COVID, the average the the undisputed ATA debt was about $26 billion. Sounds a big number, but as a percentage of the collectible tax, it's not a massive number. Having said that, as a result of COVID, floods, fires, we had an economic downturn, we've now got whatever's happening in the in Iran at the moment and the impact on petrol, we've now got a fifty-four billion dollar undisputed tax debt. We believe it's in e in excess of sixty billion because there's a lot that hasn't been lodged, and two-thirds of that's a small business. So that means that there is this massive, massive debt out there. Um and there's there's a real pressure on the commissioner to do something about that. And and why the brokers need to understand that is I'm I'm a simple creature, I think, in terms of carrot and stick, um, opportunity and risk. The opportunity is that because the debt is so much more, there are so many more businesses out there with ATA debt. When I do the the the the the sort of education pieces with the broker groups, the first question I ask is hand up if you've um dealt with a client in the last six months with ATA debt, almost every hand goes up. Then the second question I ask is leave it up if it impacted your ability to get finance. And most hands stay up. So there is so much debt out there, but I see that as an opportunity because I look at it and go, there's sixty billion dollars that needs funding. And the reason that it needs funding more so than ever is that our client base hasn't changed dramatically over the last few years. But our average tax debt that we looked at, we've got everything from you know a tradie with $50,000 debt to I'm talking to a company at the moment with in excess of $10 million in debt. But our average debt was around about $400,000. It's now pushing the million dollar mark. And what that means is businesses that could trade out and do a long-term payment plan for $400 can't do it for a million dollars and they need funding, and that's where the brokers come in. The flip side of that, which is the the stick or the risk, is, and we'll talk a little bit more about what the ATO is doing about it and what they can do about it, but if you are a broker and you are dealing with a business and they have ATO debt, there's a massive risk of the ATO coming in and blowing the deal up or creating a situation where that that client either disappears altogether or becomes unfundable. Now, all of this is a hundred percent avoidable and um and it just needs the right intervention at the right time.
SPEAKER_00You mentioned that the commissioner um is under pressure um now to uh to collect um some of that debt and and and and get that uh back under control. Yep. How's that manifesting itself?
SPEAKER_01Yeah, yeah. Look, I think the the commissioner's probably under pressure to do three things. One is to is and as I said before, not necessarily to collect the debt, but bring the number down, get it off the balance sheet, so to speak, for the government. And as I mentioned before, they can either collect it or they can write it off. Ironically, to collect it takes two to three years, depending on how good your negotiator is. Um to write it off takes about eight weeks to to actually wind up a company. Are they agnostic? No. They would prefer to collect the debt, but if they can't and if businesses aren't engaging, they will go down the other route. Um the other thing they they they desperately needing to do during COVID, there was a message going around saying, as long as you keep your lodgements up to date, preserve cash and you don't need to pay us. And that went on for nine months and then it rolled for another nine months, and then they started what they called soft collection. Um but the problem is they got taxpayers out of the habit of paying tax. And so one of the other things they're trying to do is change the thinking of these businesses that owe money to say it's really important that you pay your tax. Um, and the way they're doing that is through hard and fast recovery action. There's a third thing that the Commissioner is trying to do, and this is probably little less known than the other two, and that is that the percentage of taxpayers that o don't pay their tax and actually owe money is actually quite small in terms of the broader community. But they also want to send a message to the broader community to say the ATO is not a cheap and um and uh uh easy source of finance. We're not cheap. It's 10.96% compounding daily, plus from 1 July last year, no longer tax deductible. It's expensive finance. And they do that intentionally because they don't want to be a funder. It's not easy finance, it's easy to get, because you just don't pay your tax. You don't have to make an application, you just don't pay your tax. They're a they're a lender. Um but it's not easy to have it, and this is I've been doing this for twelve years. This is the toughest time for businesses to owe money to the HO. This is the hardest they're going and the fastest they're going, and it's very dangerous debt to have. So um you know what that means in in broad terms is that the a is that the commission is doing two things. They're tougher on payment terms, and so I think one of the things people often say is, well, I've got a debt, I can get a payment plan and I'll clear it. There's actually no right to a payment plan. It's a discretion. And if you don't fit the criteria, they're entitled to say to you, no, um, we want it paid in full next week. So they're they're applying the legal practice statements really strictly around that, and they're going very hard on it. Um the other thing they're doing, and I've mentioned before around um is the um the the the the the you know, I call them the four horsemeat apocalypse. The things that the ATO are doing for those businesses that are not engaging, they're not in an active payment plan. Would it be helpful? I might just run through it quickly because we're gonna be able to do that.
SPEAKER_00Yeah, it'd be fascinating because I it uh this is a great education for me as well.
SPEAKER_01Yeah, and that's what I'm kind of thinking around this is that you know there'll be a lot of brokers who will be listening to this, and I don't think people need to learn to be experts in tax debt, but what they do need, again, going back to that opportunity piece, is when a client comes to them and says, Hey, this has happened, they go, I know what that is. I know there is a solution to it. I might they might don't need to know all the nitty-gritty. So broadly, as I said, the ATO have these very, very and again, probably the other thing I'd say before I get into it, again, these are all 100% avoidable. I often tell a story about um when I was uh a bit younger and I was trekking in Nepal and I've got altitude sickness, and I don't know if you've ever had it or you'd know much about it. It's not fun. People die from it. And basically um but the thing about it is it's a hundred percent avoidable. All you need to do is, well, you can avoid it by going up more slowly and resting as you go up, but you can you can actually get rid of it by coming down. And the people that die get disorientated and don't realize and keep ascending and then they die. It's a little bit like this with with what we're about to talk about, what the ATO can do. It's a hundred percent avoidable with the right action to um to get businesses into a payment plan and um and then they're bulletproof from the ATO. So the four horsemen, the first one, and they roughly do it in this order, though it doesn't have to be. Um they the first one is credit reporting, and that's a big one for brokers because I would get a call at least once a week from a broker who says, I've been working on this deal for three months, um, we're just about to settle it. The funder did a search and there's a credit reporting from the ATO, funders out. Now, the criteria to get that is if you have a debt that's more than $100,000 and more than 90 days overdue, and we've got thousands of businesses out there who are still getting over COVID. So those criteria are really, really easy to meet. And it's not just companies, it's individuals, salt traders. If you've got an ABN, you're caught. Then what happens is you get a notice from the ATO to say pay the debt or get into a payment plan. If you ignore that, they report you. They don't tell you anything more, and the first thing you know about it is when um one of the credit agencies um somebody has done a search, or we had a we had a case recently which I might tell you about was it was a a um construction company in Queensland. They had a debt bit over about $1.4 million. They had a the broker was in getting some funding for them to recapitalize the business and clear the ATO debt. Um their accountant had done a great job at keeping the ATO at bay, but he wasn't able to get them into a payment plan. And that's that's the key here is that what the ATO asked for is what they call active engagement. Active engagement used to be um talking to them and paying some money, and that's what most accountants know. Under the act, active engagement is in a payment plan or not, pregnant or not. He he they've been doing everything they can, they've been talking to the ATO, keeping in contact with them, but they hadn't got the tick from the ATO for the payment plan. What happened was um the ATO lost patients and they did two things. They issued they they did the credit reporting and they also, for good fun, gave the directors these things called director penalty notices, making them personally liable. The broker rang me in a in a sort of a a panic and said, it's all over. Because what also happened is when that went to the credit reporting agencies, all the suppliers for this construction company had issued uh alerts. They all got alerts that that they'd been reported. Suddenly Bunning said, You're on C O D. No terms. Their shell, their their um fuel supplier, you're on COD. This business was already at the margin. They were gone. So what we did in that situation was that we did two things. Firstly, we gave comfort letters two sets, one to give to the funder uh that was coming in, and also they had an existing funder who also said, We're out. And then we also gave another one to the um that they could provide to their uh suppliers to say, can you just and said, Look, we're tax assured, we've been engaged, we are, you know, based on what we know, we are going to get this business out, just give us a month. And they did. And then what we did was we got in, we got them a payment plan that they could afford. Um, and ironically it was better than it was on more favorable terms than what they'd been trying to get with the ATO and getting refused. Um, that meant that the credit reporting came off. It took about 10 days after the payment plan was in place. That meant the funding can go ahead. And then we also put an application around the interest and penalties, which was about $280,000, got that knocked off. They funded the full one, well fact they funded more than $1.4, but they only needed um, you know, $1.4 less $280,000 to clear the ATO. Life went on. So that's how if if with the right action you can prevent it, but if you don't prevent it, it's all fixable as long as you get in quickly. I've talked about the director penalty notices. The other thing that the um the ATO can do is is uh and the director penalty notice for those that don't know, it's a it's a document that makes the director personally liable for superannuation, GST, pays your go withholding. Means the director's house is on the line. The way it can blow up a deal, because we know how the first one blows up a deal, the way that one blows up a deal is depending on the type of notice, a director penalty notice they get, um, and I won't bore the detail about which ones, but one of them gives them a get-out of jail free card if they go and see a liquidator and put their company under. So therefore, and and that's what happens. A lot of directors panic and they go, oh, I've got this, my home's on the line, I've got 21 days to fix it, and the only way I can fix it is to put my company under. That means the company's gone and the deal's gone. Um then the other two, which are uh you know less common, although at the moment not so much, the there's a thing called a Garner Shee notice, which is a legal document that they issue generally to two places, uh, to the the taxpayer or the business's bank or funder, and say, if you've got any money in their bank accounts, we'd like 30% of it, please, up to the amount of the tax. Um that means that their cash flow's now shattered, and on top of that, they send it out to their clients who may owe them some money, their reputation's gone. And these are the things that are then impacting businesses' ability to get out of it. And then the final one's obviously winding them up. So the ATO has got, you know, really, really strong powers. As I said, we don't have months anymore. We had a client in WA, went from start to finish in eight weeks. They did one, let it expire, let it expire, and they went bang, bang, bang. That's how quickly it is. But again, 100% avoidable if you engage properly and you engage quickly.
SPEAKER_00So it it at that first action is is is the time to engage and well before that first action, but if that yeah, the f the f the first notification, there's still time to to engage and and and to arrest it at that point.
SPEAKER_01Yeah, people often say to us, when's the best time for us to send a client to you? Today. As soon as you can, because what happens is um the ATO have quite strict guidelines about what they can and can't do. And if this is the range of of, you know, if we're talking payment terms, if these are the payment terms you want, it happens like this as we get further down the rabbit hole of those things. For example, if you get to the point and you've got a statutory demand, long-term payment plan's off the table. The ATO will ask, well, we don't normally give this, but they'll want 50% up front in the balance over six months. We can stretch that out, but we won't a 24-month payment plan, 36 month payment plan, gone. So the sooner the better. Um and also the other thing too, every client we talk to, it's a business and it's a short, but it's a it's a human being. And most of the most of the directors and owners that we speak to haven't had a decent sleep for months and sometimes longer. So get in, fix it, and then get on with business.
SPEAKER_00You must see some people that come to you absolutely desperate, and you're able to show a pathway um to actually get on with life and get on with business. Yeah, definitely.
SPEAKER_01And it's it's you know, it's uh at the risk of sounding a bit soppy here, it's why I'll only speak for myself, but I think our team would agree with this. It's why we do what we do. Yes, we're a business, we're not a charity. We but the whole point of what we do is to help businesses and help people to sleep at night a lot better because um you know, I deal with the ATO every day, but if I had an ATO debt, it's scary what they can do. Um but again, it's fixable if you know how to go about it. I often use the analogy, it's a bit like if I had a business that maybe was a little bit distressed and I went and saw I banked with, you know, one of the major banks, they'd laugh at me. But if I went to a broker who said, I know where to place that, I know how to do it, I know where we can push things, and I know where we can get from a no to a yes, though there'll be a lot of brokers on on, you know, will be listening to this, will be going, yeah, that's me, I get that. Well, that's us with the ATA. We know where we can push them. We've got escalation points if we need them. Um we often we'll be talking to a case officer and he'll go, Yeah, I can't do that. And we'll go, well, look, try it this way. Or go and have a chat to your supervisor and s say to him A, B, and C or her A, B, and C. And they'll come back and go, Yeah, we can do that.
SPEAKER_00We we'll jump on the brokers in a minute. Um, I just wanted to ask, what's tougher? Altitude sickness or dealing with the ATO? Oh, definitely altitude sickness.
SPEAKER_01Without it, it was horrible. Uh you just feel like you you want to throw up, but you can't. You feel like your head's about to explode and you're gonna die.
SPEAKER_00So it's like being a um St. George Illoro Dragon supporter, mate.
SPEAKER_01Well, I'm a rooster supporter, so I can't uh But look, the again, but you know the interesting thing about that, and this is where it is a really good analogy with ATO debt, because our cli a lot of our clients are feeling like that. They feel sick in the stomach. They'd I had a mid-50s um director of a you know very successful company, but there'd been some things happening and I was talking to him yesterday and ironically a liquidator brought him to me and said, I don't think you need to go down this route, he can fix this. He was in tears. The poor man was in tears. And that, you know, uh because I was looking at him and I could see he was ready in the face and I said, mate, how are you? And then it just the dam broke. And I said, That's fine, we can fix this. There's a solution to this. Um and it's funny he's in Adelaide and if he could have, I think he would have crawled through the screen to give me a hug because no one had told him that there is an out and there's a there's a solution to this, um, and it's never as bad as people think, but we do think the worst.
SPEAKER_00Yeah, it was funny.
SPEAKER_01Really, really good point, Tony. And it's funny, I often, you know, as I said, particularly in the early days when I was doing this, we we would normally, you know, COVID changed a lot of things. We would do a lot by video and Zoom and Teams and that sort of thing. And ironically, people are so busy they haven't got time to come to your office. But in the early days, we would um insist that we wouldn't take on any clients unless we met them, met them in person. Um but the first thing we had to do was have a you know, a box of Kleenex there. And I'd often get people come in and say, Why haven't you paid your tax? And they'd go, Oh, look, you know, we just didn't and everything. And I I go, Well, can I ask you a few questions? And then within about f half an hour, they've told me that, you know, their wife has cancer, they've had this issue, they've lost a parent, and they're in tears about it. And I go, That's why you haven't paid your tax. But people and particularly blokes, we just go, you know, we just bottle it all up. Um and um, you know, and it's one of the things we have to teach you know, without Team, we get the right people in our team. Yes, they've got to be technically very good, but they've got to have that right level of empathy and understanding that these people are under stress and uh and sometimes they're not on their best behavior when they're talking to us because they're stressed and they just want an outcome. But gee, they're grateful when we finish.
SPEAKER_00So when these customers come to a broker, what do brokers need to know to help these customers navigate um through through these difficult times?
SPEAKER_01Aaron Powell Yeah, look, one of the things around that is um, you know, and I guess it links to what I was saying before about that opportunity piece. Um don't walk away from this. Lean into these conversations. Um I know from talking to a lot of brokers that um uh those that actually um engage on this, and because it's the elephant in the room, most, you know, as as I said, the the the the the the the client or the customer that they're talking to, they know the ATO debt's there, they've been worrying about it, they have not been sleeping. So for somebody to come in with a bit of empathy and say, How are you how's how's the position with the ATO? Actually, we've got we've got about 400k owing to the ATO on this. Okay, let's talk about that. Let's see how we can sort it out. Because it's going to come out anyway through part of the funding process. But the brokers that are comfortable with that, um, not only do they then win that client, that's a client for life. It's easy to fund people when everything's going well. It's when things are tough and you get them out the other side of that and you stay with them, you've got a client for life, and on top of that, they tell all their mates. So I'd say to brokers around that, don't be afraid of this. And even if you don't understand all the terms and so forth, it doesn't matter. Just connect human to human and say, talk to me about your ATA position.
SPEAKER_00Yeah, take taking someone from a really difficult circumstance and and um showing a pathway or solution is your best referral source and your best advocate moving forward by far.
SPEAKER_01Yeah, I think that's definitely right. As I said, particularly in that situation where they're in need. And, you know, when people get into trouble, they don't you know, there's been studies done, people's IQs literally drop. They can't think straight, they don't know where to go. Often there's a lot of predators out there. They'll have people talking to them about doing small business restructuring or something like that that they really don't need to do. And then for somebody to come in and go, let's just take a breath, let's talk about this in detail, let's work it out and let's find a solution for you.
SPEAKER_00So we've almost run out of time, but um I I can't let uh this episode go um given that we're relatively close to uh federal budget uh just being um brought down. Um is there anything in that that jumps out that will impact or or you think um comes into play um in regard to uh to tax debt and the customers you deal with today?
SPEAKER_01Yeah, look, I think um probably a couple of areas. I know there's been a lot of talk about, you know, the the property market and the impacts on the property market. And so look, there's no question that look, I'm not I'm not a financial planner or or a an economist, but you know, as a basic thing, there's been a lot of people in the press talking about um the ability to borrow money, and I think borrowing capacity is gonna come down. But specifically around the ATO piece, I think the the real issue is going to be you know there's additional taxation on trusts and so forth. So there's gonna be a bunch of people. I had a conversation coming to this with somebody saying, look, we don't advise on this, but saying, I've got all this money in my business, I'm not sure how I'm gonna get that out and not pay all this tax. So there's gonna be more tax to pay. And I think that's one of the things that um, you know, is is we've already got a very stressed business community, and this is just one more thing that they've got to worry about in terms of, well, how am I gonna pay that tax now? Which I used to sort of split you know between family members and so forth, and now, you know, they might have had an effective tax rate of 15%, and now it's gonna be minimum thirty.
SPEAKER_00So more and more pressure and uh more pressure. But um actually, you know, more and more opportunity to be able to help customers navigate through this and and message I'm clearly hearing is um engage early, and there normally is, if not there always is a path uh pathway forward uh if you do find yourself in these difficult circumstances.
SPEAKER_01Yeah, 100%. We you know, to give you a number, I'm a numbers guy, I've a I've got a law degree and accounting degree and all that sort of stuff for my sins. But the one number I think takeaway is 97% of the clients that we see we fix.
SPEAKER_00Wow, that's that's that that's a great number to um to end on. Thank you for uh for joining us uh and sharing your expertise in this episode. Now, Michael will uh be back in the next episode where we'll um chat about how brokers can help clients navigate um ATO debt. But thank you also for joining us, and please make sure you subscribe, stay connected for more insights. Thank you, Michael. Pleasure and we'll see you on the next episode of It's a Broker Thing. That's a wrap of this episode of It's a Broker Thing, brought to you by Bluestone Home Loans. We love sharing ideas that help you stay ahead because backing brokers, well, it's a Bluestone thing. Hit subscribe and join us next time for more insights and stories that keep you in the know. This podcast is for general education only and isn't financial, legal, or tax advice. Guest views are their own. Bluestone accepts no liability for errors or how you use this information.