Small businesses are increasingly using unpaid superannuation to fund their working capital needs, mid-tier accounting firm RSM Bird Cameron said.
The firm said that while small businesses mainly turned to bank or business finance of some form to plug their capital gap, they were instead turning to unpaid super and GST/PAYG as an artificial type of finance.
RSM Bird Cameron managing partner Canberra, Frank Lo Pilato, said this not only results in employees and taxpayers losing out, but it gives an unfair advantage to those businesses over businesses that meet their obligations.
“Where companies are wound up, unfortunately it is usually the employees who suffer most, as although other entitlements are covered under the Fair Entitlements Guarantee (FEG) scheme, unpaid superannuation is not,” he said.
“The loss caused by unpaid GST and PAYG obligations is also ultimately borne by the taxpayer when companies are wound up and there is no distribution to creditors.”
The observation comes as the Australian Taxation Office (ATO) sped up applications for winding up companies, which more than doubled in April compared to March, with May numbers indicating even higher numbers.
The ATO is eyeing any business with taxation debt of $100,000 and no repayment plans in place.
“The best opportunity of recovery for a business is to seek professional advice early,” Lo Pilato said.
“Far too many businesses are leaving it too late to seek assistance, which drastically inhibits their ability to be turned around.”
