Do not fund a revised tax offer with an unexplained lump sum
Assess the source and consequences of proposed upfront funding in a revised ATO payment arrangement.
Corporate Recovery Partners
01 / 06
An upfront amount needs a funding explanation
After a payment proposal is refused, you consider offering a larger initial payment. Before doing so, establish where the money would come from and what obligations it creates. A borrowed lump sum or proposed asset sale may change the business's wider position. Ask the tax adviser and other appropriate professionals to assess it before making an assurance.
Imagine a director considering a family loan to support a revised tax proposal. Record whether the funds are merely discussed, formally agreed or actually available, and on what terms. Do not describe an expression of support as confirmed cash. The family member also needs to understand the proposed arrangement and obtain appropriate independent advice where needed.
business.gov.au explains that cash forecasts include incoming money and outgoing commitments. Put the proposed funding and any repayment into the same view. Include current trading costs and new tax obligations with the tax agent's input. Paying an upfront amount should not make the later obligations disappear from the calculation simply because they arise under a different agreement.
If the proposal relies on selling equipment, ask about ownership, finance and any required consent before treating proceeds as available. Obtain realistic cost and timing information. In the director's example, a possible sale could be delayed or produce less net cash than expected. The tax proposal should describe those uncertainties accurately rather than promise a sale price as an immediate receipt.
Ask whether the proposed payment leaves enough capacity for the commitments that follow. If the company cannot meet debts, obtain qualified insolvency advice promptly. Do not make selective transfers or new personal commitments simply to produce a more impressive opening offer. The aim is a proposal that can be understood and performed, not just a larger number.
Have the revised proposal and supporting evidence handled through the appropriate adviser or official channel. Record what is actually accepted and keep conditions visible. A larger upfront amount does not guarantee approval or suspend other action. Its usefulness depends on a realistic funding source, the remaining obligations and the assessed circumstances.
