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In April 2022, the ATO issued 50,000 letters of demand to company directors giving them 21 days to resolve tax liabilities.
Historically, once ATO and major banks start escalating collection activity, it’s not uncommon to see insolvencies rise.
This piece from Holman Webb's Commercial Recovery and Insolvency Group highlights the impact that the ATO's issuance of these letters is likely to have within the building and construction industries.
The Australian Financial Review recently reported that “total construction sector inflation will hit 9.5 per cent over the year to June 2022, and 6 per cent over the year to December 2022”.
This increased financial pressure in the industry will heavily impact the likelihood of increased insolvency activity.
With the latest ABS statistics confirming that the CPI increased by 2.1% in the last quarter, and that inflation reached 5.1% over the 12 months to March 2022 quarter (the highest since 2001) - those in the building and construction industries have been particularly hard hit.
Higher inflation impacts:
These additional costs have flow on effects to construction activity, some of which may be far reaching.
As all credit professionals know - credit, cashflow and collections all work together to protect the lifeblood of many businesses. Without a proper functioning credit team, businesses run the risk of significant impacts on ongoing profitability and viability.
Unfortunately, risk is an unavoidable part of the credit function.
With this in mind, this article from Commercial Recovery and Insolvency Partner Chris Hadley and Special Counsel Andrew Tanna highlights how carefully considered credit terms can help to mitigate risk and provide safeguards to your business.
This piece was originally published in the Australian Institute of Credit Management's 2022 Risk Report published 30 May 2022).