Tourist hotspot keeps the party going with restructuring deal

A Queensland hospitality group recently discovered how it’s doable to undo with the turnaround experts at Worrells. Utilising the Small Business Restructuring method, they brought their entertainment and tourism hotspots back from the brink and returned to the spotlight.

Operating multiple hospitality businesses on the Gold Coast, employing over 350 staff and contractors, they suffered significant setbacks due to the impact of COVID-19 restrictions. Operations and revenue streams suffered, and social distancing requirements meant that their usual patronage of over 1 million was not feasible.

The operating companies in question didn’t hold leases, employ staff, have supplier accounts, or in-house marketing or administration. These functions were provided by related management entities, who charged market value ‘management fees’ for the provided services. A saving grace to the business during COVID was the reduced and/or paused fees from the management entities.

However, all of these factors culminated in challenges in their reporting and payment obligations to the Australian Taxation Office (ATO). With largely GST and PAYG liability, the operating companies owed nearly $3.5 million. Prior to their SBR plan, they had entered and defaulted on a number of ATO payment arrangements. Refusing further extension requests for key lodgments, the ATO advised that it would not entertain further payment arrangements until such time the outstanding returns were lodged.

Once the Worrells team were engaged, we took swift, proactive action to liaise and engage with the ATO early in the process to find the best course forward. As they were the major creditor in all the operating companies, it became apparent that specific information and documentation would be required for the proposals for each company. When it was possible, we submitted draft proposals to the ATO to obtain feedback on the proposals. In turn, the ATO provided feedback on the “strength” of the proposals – increasing the likelihood of the proposal being accepted. This included factors such as the amount of proposal that was being paid upfront and the periodic contribution amount in comparison to the surplus cash flows, based on future forecasts provided by the companies.

This methodology allowed us to showcase a viable path forward that promised recovery and growth for the hospitality group.

As required by law, each of the companies owned by the group made individual proposals to the ATO – providing an average return of 21c on the dollar. In a monumental victory for the group, the ATO accepted the offer, reducing the total tax obligation of the companies by over $2.5 million.

With this incredible result, the group is now firmly back on their feet. This case is a shining example that with the right support, determination, and expertise, it’s indeed do-able to undo even the most daunting of financial challenges.

Business can be tough, and we understand that at Worrells. We help you consider what can be done to turn around a business first, exploring restructuring options that can buy valuable time to get businesses and its owners/directors back on their feet.

Contact us to discuss the options available in dealing with financial struggles and allowing a business to survive. It’s do-able to undo, with turnaround experts.