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
10. Want A Client For Life? Talk About Their Tax Debt - with guest, Michael Moon
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
ATO debt used to be something brokers hoped would go away.
Now? "It’s the elephant in the room."
In the latest episode of It’s a Broker Thing, Tony MacRae sits down with Michael Moon from Tax assure to unpack why brokers who lean into ATO debt are closing deals others walk away from.
With the right conversations, funder, and exit strategy, a “non-deal” can become a deal, and a once-off client can become a client for life.
🎧 Tune in to the latest episode of It’s 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. ATO debt can have the potential to unravel a deal, but brokers who know how to handle it are turning these challenges into a competitive advantage. On this episode, we'll chat about opportunities for brokers and where they may be missing out and actionable takeaways to help your clients navigate ATO debt. Joining me again for the conversation is Michael Moon, Director at Tax Ashore. Michael, welcome back to It's a Broker Thing. Thanks for having me again. But in the uh the last episode, um, let's just do a really quick recap. We looked at uh um we touched briefly on the um the potential impact of the uh the feder federal budget. We spoke about the uh mountain debt mountain at the ATO. We did. You educated me on a a new term, the four horsemen. Yeah. And uh and why it's uh it's important for uh for brokers to to understand this. What what what in just briefly, um your key takeouts?
SPEAKER_01Yeah, look, I think that's the thing. I think we talked a lot about misc misconceptions. And one of the key ones for me was around the fact that um funding businesses with ATO debt is too hard. So a lot of businesses walk away, they leave money on the table for another broker to pick up and and to take that client from them. Yes, you're right, we talked about the debt mountain and how we got there. But most importantly, what the ATO is doing around um collecting that debt and getting businesses compliant again and why that's important for brokers to understand, because if they don't, um they can very quickly derail a deal that the broker might be doing. Um I think the main thing that we picked up on was the you know, the opportunity. There is a massive opportunity. There's 56, 54, 56, depending which um statistic you use. We believe it's in excess of sixty billion dollars that needs funding. Um more businesses need funding to get over the age their their personal ATO debt mountain because they can't do it out of cash flow. So those businesses that are thriving, and and I'm when I'm saying the the the f the broker businesses that are thriving are the ones that are taking this on. It's interesting, I was at a a a talk recently and somebody said, is AI going to take over from brokers? And they said, no, AI won't take over from brokers, but what will is brokers who embrace AI will take over from brokers that don't. And I kind of use that as a bit of an analogy here to say those brokers that are that that are comfortable in this space with ATA debt and not only not walk away from it, but actively chase and target and help businesses that have ATA debt, they will be far more successful than the ones that are that that don't do that. And so I think those were the key messages really around there's an opportunity, and the opportunity is north of sixty billion dollars, and there's a risk if you ignore the ATO, because we talked about the four horsemen of the apocalypse, credit reporting, director penalty notices, garnishing notices, and winding up of companies, all of which can either blow a deal up or make a business impossible to fund. Or we we're talking a lot about new business, but a lot of our brokers have had clients for many, many years, and it's a way to protect their existing clients as well, and the funding that's associated with that, because if the client gets in trouble with the ATO, they can disappear. And so knowing how to engage and knowing what to do around this is critical, and I think one of those things that's not it's a non-optional thing for brokers now.
SPEAKER_00Yeah, it's uh I was recently in a um a session with Warren Hogan who who used the analogy with AI that um those that embrace it and and and use it will get to control it. Those that uh try and ignore it and view it as a negative, it will consume them and and and and overtake them. And and I think in a similar light, those that are proactive uh with with broker um debt, uh with uh ATO debt, um actually um as we spoke last time, there's normally a pathway forward for uh with it.
SPEAKER_01Yeah, there's a wonderful quote which is attributed to um you know Winston Churchill, never let a good crisis go to waste. And I think that's where we're finding ourselves at the moment for brokers, is that they really, you know, lean into this rather than leaning away from it and thinking it's all too hard, lean in and take advantage. And I don't mean take advantage of the people you're dealing with, because the people that have got the tax debt, the businesses, will be so grateful to have a broker that will um that will will help them through this difficult time. And I think one of the things we talked about last time is, you know, the broking space is a very competitive space and people are always looking for an advantage, pick me as opposed to pick, you know, John Smith. Well, two things. One is if you can actually come to a uh a deal that is affected by ATO debt and go, I know about that, I'm comfortable about that. Don't need to be experts in it, but just know the basics. Go back and listen to the podcast we did last time if they haven't already done so. But also, you know, working with that client through that is is something that's going to m really distinguish them from the other brokers that are out there. Um, and not the least of which, as I've you've heard me say a couple of times, if you're letting these deals go, you're really letting somebody else cut your lunch. You're letting somebody else take the money you've left on the table and take the client. And we know if you help a client through a difficult time, they're not just a client now, they're a client for life, and they tell all their friends.
SPEAKER_00That's a good segue into let's chat about what brokers can actually do. And interested in in in where brokers are unintentionally walking away from good clients because of ATO. And then what um the smarter ones or or the more switched on ones and how they're approaching the same situations.
SPEAKER_01Yeah, yeah. Look, I think the thing about it is, as I said, we often we often walk away from things because we we fear them, we don't understand them, we worry that we're not the right person. There's lots of reasons why they they walk away from these deals. And so I'm a big fan of getting the right help. And so if I'm a broker and there is a um there's a deal on the table potentially, it's with a a you know, doesn't matter what sort of businesses it is, but there's an ATO debt there and they're going, I don't know. Well, if you get the right people on board, you need you need the right funder. There's plenty of funders out there who will fund businesses with ATO debt. You think of any off the top of your head? Oh, there's a starts with blue something, I can't remember. But there's a th there's certainly one out there that I know at least very well. You know, Bluestone, and I'll use it as an example because um and I know this isn't an ad for Bluestone, but while we're here, one of the things that I think sets Bluestone apart is not only is as a as a as a funder is it comfortable with ATO debt, it likes funding ATO debt. It targets AT. It's the things that I'm saying the brokers should be doing. You know, Bluestone also have this wonderful, and we'll talk a little bit later about what happens if you haven't got enough money to pay the ATO out in full. Because many funders will say we'll fund it, but we need to have no ATA debt at the end. And, you know, Bluestone, one of the few lenders that I know who will leave some of it on the table up to a certain level, provided all the other metrics work around servicing and so forth. But but so I think that's the key, is you get the right funder in place. Then you get the right advisor in place, whether it's us or another advisor or even the accountant, but somebody needs to manage the ATO. If you I often say this and people raise their eyebrow, I say, let's bring the ATO into the deal. The ATO love it. If we go to the ATO and say, Hey, we've got this business, you've just been threatening all these horrible things to do to them, the four horsemen. But guess what? We've got an exit strategy. This is how it's gonna work, this is how we're gonna exit you, Commissioner. Um, you just need to sit there and let us give us, you know, broadly, you know, you can put businesses into long-term payment plans, or you can put them into short-term ones that allow funding to occur. And once they're in that arrangement, they're bulletproof, the ATO can't touch them. The broker knows the deal's gonna happen. And I don't get one of those phone calls often late on a Friday afternoon saying we've just about to settle this deal and we've done a search and the ATO has done X. And it's usually credit reporting, and then the deal's off. How do we fix it? And we can fix those. We get the credit reporting removed and we get the deal back on track, but sometimes it's not that funder because that funder's been scared off and they have to go somewhere else.
SPEAKER_00Yeah, I was going to ask about you know that that you know perceived or so-called non-deal and and how do you turn that turn that around and make it a deal and the practical tips for brokers in being able to do that?
SPEAKER_01Yeah, yeah. Look, I think I think that the the there's a few different ways around that. Um obviously the first way to turn a non-deal into a deal is if one of those things has happened. And again, for those that maybe missed the first one, the two big ones that tend to get in the road of doing deals is the credit reporting, because that impacts significantly the ability to get funding. Either you're part way down the process you're about to start, or um if a director penalty notice gets issued, because what happens there is the director looks at that and goes, gee, I've got this director penalty notice, I've got 21 days to make a decision, do I back my house, my all my personal assets on this, because they're now personally liable, or do I go and see a liquidator and they'll get rid of the the personal liability and the company goes under. So that's you know, the most obvious way to get a non-deal to a deal, and all of that's avoidable. Put them into a payment plan, put them into something they can afford, all of that goes away, the ATO is happy. Um probably the you know, the other most common thing that we see is that and we often see it where um they'll go they'll they will go to to do the the funding, then they'll approach a number of lenders and there's an ATO debt there. And one of the first questions is, is it managed? Is it in an active payment plan? And the answer will be no. And then the lender will go, we're out. We work with a lot of um brokers in those situations and say, look, we'll get it managed, and then we'll give you a letter, which you can take to the lender, to say it's under an arrangement, it's bulletproof, the HO can't do any of the nasties. And we say that all the time, and then the lending goes through because it takes, you know, it's all about risk. I mean, you know, at the end of the day, um we do a lot with the sort of the the I guess the the BDMs in in the broking the in the sort of the funding sort of things, but it's the credit managers that are really interested in having this sorted, and then again it turns it internally from a non-deal to a deal and they move on. Um the other area we often see is where there are you know there's there's a there's a might be a four hundred thousand dollar um uh debt there and the ATI and and the um and that you know the LBRs don't stack up. And they can only get three hundred and say fifty thousand dollars out of it. If you and I were having this conversation twelve months ago, what I would have said is, we'll go in. I there's if there's four hundred grand in debt, there'll be almost certainly fifty grand in interest. We just know how the numbers work out. So we would go in, get that removed, have it at 350, and then a non-deal becomes a deal. It's a little bit different now because the ATO have a very low appetite to do that up front. But what we can do is um they um they we we can go in and get the um pay out the print primary tax debt, leave the the little b little bit there that's the interest if the fund is happy with that, as I know it's sort of bluestone are, as long as it all matches up, and then um we'll go back and clear that. And we do it after settlement now rather than before settlement. The other thing too is even if there is the LVR is fine and they can borrow the full 400, what we often say to a lot of the brokers that we're talking to is, how would it feel if you did the funding and at the end then said to them, Hey, I'm gonna get you a fifty thousand dollar refund from the ATO? And the client looks at them and says, How are you gonna do that? Well, there's fifty grand in interest set, you've paid it all out now. We know, as I said, get the accountant to do it. Um it's quite you know, if they can, otherwise, you know, see a specialist like us, we get it removed. They actually get the money into their bank account. So massive value add from what the broker has done for that client. And again, we're talking about creating sticky clients and good client relationships, um, then you know that's that's an amazing way to sort of achieve that. So, you know, the other thing too, often we will get a lot of referrals where um they go, I can't do the lend now because of the tax debts. We'll renovate the client for them and then send it back to them and say, now, see if you can do the deal. So there's lots of different ways to do that.
SPEAKER_00And I think you said in the uh the last podcast that you you have uh a 97% uh um success rate of of getting an outcome um for the for the customer. Yeah. The the the interest peace um I'm I'm fascinated in. What percentage do you have to fall back on that interest piece um in those success rate?
SPEAKER_01Yeah, look, and it's funny too, uh you know, you're right. I did mention 97% of the clients that we see. The 3% that we can't fix, we actually don't take them on as a client, but we'll help them to find. We recognise that up front. We do a different path. We need to take a different path. And they're generally it's it's generally for one reason only. They can't pay it back in a time frame the ATO can agree on. Right. So everything. So but if we take them on, we're at 100% on solving that part of it. In terms of the interest remission, look, it's a it's a bit tricky at the moment. Uh you know, again, if we were having this conversation even 18 months ago, it was a similar number. At the moment, the ATO have changed dramatically their attitude to uh the remission of interests and penalties. In the 22nd of January this year, they brought in a new process, because there was an Ombudsman's report that was done last year and a review, and there was a lot of criticism of the ATO over inconsistencies and being too hard and everything. So we've got a whole new process at the moment. Um we've got about 35 applications that we've put in around that. Um so far all of them have been successful, but will that be the case moving forward? We don't know. It's it's very, very early. But you know, will it be I will it be 90, 95%? I don't know. It might be 50% we don't know at this stage. What I do know is that um it's in one sense made this even more specialized because there's only really two people that do this, the accountants and organizations like us, and we're the largest in the country and so forth. Um and you know, when I first started this doing this business twelve years ago, one of my best mates is an accountant, and he said, You sure there's a business in doing payment plans and what we call remission applications, removing the interest? And I went, Yeah, I think so. I think so, absolutely. And he said, Well, because we just let, you know, the the junior guys do that. Those days are gone where literally and I think it's taken another level of complexity so that it's you know, it's even more specialized. So watch this space. I'm not sure what our success rate will be around it. It won't be 100%, I know that. But what I do know is again, it's a bit like with what clients we take on, we're now vetting them much closer so that we're not wasting their time and our time putting in applications and damaging our reputation with the ATO for applications we don't think if somebody comes to me and says, I didn't pay my tax because I, you know, I built my house and there's nothing else there, well, we probably wouldn't take that client on. But if there has been things that fit within the legal practice statement and we know what those are very detailed, and we know all the bits around it, and we look at it and go, yeah, we think there are grounds.
SPEAKER_00And are there there red flags or or things that brokers should be looking out for that may suggest that there's financial stress or ATO debt when dealing with customers?
SPEAKER_01Aaron Ross Powell, Yeah. Look, I think the the the biggest indicator of financial stress, ironically, is ATO debt, in my view. And it's not because we Well, look, I look at the world through the lens of the ATO debt thing because that's what we do and so forth. But um you know, one of the things we talked about last time was, you know, the ATO are trying to send a message that they're not a um uh you know a cheap and easy source of finance. And I made that facetious comment, well, it's easy to get the finance, you don't you just don't pay your tax. But um but that's the reality of it. If I'm in business and I'm short on cash and I can pay my staff and my suppliers and the ATO, who are you going to leave last? And if there's not enough money for all, they're the ones that get left. So um I say to all the brokers that I'm talking to, um, you know, you've heard me say this before, lean into the conversation, find out if there's ATO debt and um and and talk to them about that. Then, you know, if they say yes, there is ATO debt, and again, going back to what we've talked about before, if you have ATO debt, they must be in an active payment plan, otherwise the ATO can intervene and blow the whole thing up. So the next question would be, you know, if there is ATO debt, is it in a payment plan? And then the tricky thing around that is what's in a payment plan today may not be in a payment plan tomorrow because they're very easy to breach. So then I would be saying, you know, talk to the accountant, they can check on the portal, is the thing still active? And if it's not, um then that's a real red flag that this company or individual, it doesn't matter, is at real risk of of legal recovery action from the ATO, and as we've already talked about, it happens very hard and it happens very quickly. And so if I'm a broker, I want to know that and then I want to get that managed so that I can focus on what I want to do, and that is to get this deal across the line and get them the funding they need to either solve that or recapitalise the business or whatever they're doing.
SPEAKER_00So that conversation is no doubt very important and and and and getting underneath that and understanding it. But I suspect it's also an uncomfortable conversation at times, and particularly for brokers. What tips have you got uh how to approach this in a in a constructive and proactive manner?
SPEAKER_01I remember you know, as I said, we've been operating 12 years, and um when I first started doing this, I would talk to a few brokers and say, well, what about the ATA debt? And they go, Oh, we don't ask. Well, those days are gone because now the lenders go, we want to know about it. So the reality is it's going to happen anyway. Somebody's going to ask for a portal statement, somebody's going to know what the situation is. So my view is on all of this, it's a little bit like the elephant in the room. What we will know is the business owner will be well aware of what it is, might not know the the exact number, but they'll know they're in trouble. They'll know they've got it. And most of the clients that we see haven't had a decent sleep for some weeks, months, sometimes years. So I think as a broker, get comfortable with the idea of it. It's not a dirty word. I mean, it's a little bit like, you know, there used to be when debtor funding first came into Australia, it was seen as only businesses that were in trouble were using it. And now that's gone out of the window and you know, the the UK experience has shown us it's just a legitimate type of funding for a business. And once we changed the narrative around it, insolvencies became a dirty word until ever the you know we had all these dramas coming out of COVID and a lot of businesses went under, and it was okay to be a director of a company that went under because many did. We now know we have a $26 billion ATO debt that's blown out to a $54 billion ATO debt, which is probably more sixty plus billion. So there's a lot of businesses out there, and um I would have said on the last occasion, when I speak to broker groups, I often say to them, hands up, if we've um if you've dealt with a client in the last six months with ATO debt, most of the hands go up. And the ones that don't go up, I call BS on, and they're just lazy and don't want to put their hand up. So it is everywhere. So let's not be shy about it. Let's get on the front foot, let's talk about it and talk about solutions. That 97% thing. Talk about solutions and if you are if often people say, Are you comfortable talking about ATI debt? Sorry, are they will they be comfortable? And I go, if you're comfortable, they're comfortable. So my big tip is for brokers, get comfortable about it. Don't you don't need to be an expert on debt, you don't need to be an expert on tax, but you just need to be comfortable having that conversation around it. And the c the business owner, your client, your customer, they'll come with you and go, okay, this guy's okay with this. I can and they'll spill. And they really will. And you know, the number of people that I've spoken to over the years, and you know, these are people that have been in business for a long time and robust men and women in tears because it's just been building and building and building. So if you want to build a sticky client and uh, you know, and a client for life, have that conversation and it will never be as hard as you think it's going to be. But gee, you can really A, you can help somebody, we're human beings after all, let them talk to you about it and explain it, and then say, okay, let's put the cards on the table, let's bring the right advo you know, the right funder, the right advisor in, and let's fix this for you and let's get you out the other side.
SPEAKER_00So the the the stigma is is is dissipated here. It's it's far more common. So this should just be part of a broker's discovery conversation and and normal practice now with with all their customers.
SPEAKER_01Yeah, couldn't agree more. And I think that's the thing is that um you're right, the stigma has gone because it's everywhere. You know, I I hate using the term, but you know, people talk about the COVID pandemic. We've got a tax pandemic at the moment. And what we do know from the ATO, um, you know, we we talk, you know, we're at budget time and that sort of thing. One of the things we do know, funding for the ATO hasn't gone down in the new budget. It's gone up. So this is not going to change. Everything that's come in out of the ATO is saying um we we're part of the way down there, but we've got a way to go to bring this ATO debt mountain under control. There was also a a comment by um one of the deputy commissioners that said we expect the funders out there to get over this idea we don't fund people with ATO debt. And start funding these businesses if it's a if it's an appropriate deal. So um I think there'll be pre you know there's pressure coming from the from the ATO saying we don't want to be the funder. We want the private sector to take over and actually fund these debts. And that's partially the reasoning behind the fact that not only do they charge you know fairly hefty rate, 10.96% compounding daily, but they then in January uh sorry in July last year said, and now it's no longer tax deductible. So go and get go and get your funding from a pr from a private lender that will be tax deductible, um and um and you know, we we want out. We're not a we you know, I remember being told by the head of the tax debt section ten years ago, we're not a a funder by choice with Australian businesses. We don't want to be in business with businesses as a funder. We want to be a tax collector, and that's it.
SPEAKER_00Yeah. So if businesses or brokers um do have an issue here and want to get in touch with yourself and tax at sure, how do they go about it and uh how do the arrangements look?
SPEAKER_01Yeah, look, uh it look really, really simple. I mean our details, we've got a website, we've got a YouTube channel, there's plenty of content around uh who we are and what we do. So yeah, just get in touch. Um the you know what we um uh you know, we we try to keep the process as simple as possible. So if if you're a broker and you've got if you're not sure, give us a call. We're a bit weird, we like talking about tax debt, we'll tell you whether we can help or not. If we can, and almost certainly almost always we can, uh it's only that 3% we can't, then it'll be a simple case of an introduction, um and then we will uh do a review of the the the customer's position with the ATO. We'll come back with a report that says this is where you're at, this is what we recommend, and these are the costs. We don't charge to do any of that because that's our due diligence. Um if the broker wants, we we we will pay a referral fee for that as well. Um and um and then we just get on with it. And the reason we do all that work up front is almost every client we speak to go, oh how do we get started? So I don't have to think about this anymore. Fees are never an issue. We we charge a fixed fee to to stop the recovery action and get the um the debt under control, if I can put it that way, and protect the director and protect the business and and the owners from the legal recovery action. Everyone knows that up front. And in terms of the removal of the interests and penalties, that's on a success fee. So if we get nothing back, costs them nothing, and we we all share in the in the benefit.
SPEAKER_00So brokers, there's a sixty billion dollar issue, which is really a sixty billion dollar opportunity out there. And and my question is, how are you going to help customers uh in this particular space? Michael, thank you again for uh joining us on It's a Broker Thing. I know uh the brokers in our audience um uh will have uh loved your expertise and your insights there, and it's uh always a pleasure to catch up.
SPEAKER_01Thanks, Tony. Thanks for having me.
SPEAKER_00And thank you for uh for tuning in again. Make sure you subscribe and stay connected for more insights and information. And we look forward to seeing you again 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.