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Early intervention ‘critical’ as insolvencies surge

Tough conversations and engaging clients proactively will be key to minimising fallout, say insolvency specialists.

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Interest rate rises, inflation and cost of living pressures are starting to have an impact on the Australian economy, leading many businesses to cut back or close entirely, a specialist law firm warns.

Taylor David Lawyers partner Scott Taylor cautioned that business conditions will likely deteriorate further throughout 2023, with 50 per cent of fixed rate mortgages expected to expire this year. 

“These increased mortgage repayments will have a significant impact on households and the wider economy” he said. 

In addition, Mr Taylor said the ATO is now back in enforcement mode after showing leniency during the Covid period.

The ATO has been chasing businesses that have not paid tax in the past two years, he said.

“It’s inevitable that many of these businesses will be turning off the lights for good. In a practical sense, there are consequences for business owners who have swept their financial turmoil under the rug,” he stated.

Insolvency Australia director Gareth Gammon explained that insolvency rates that were artificially supressed during the Covid period with Jobkeeper payments and the insolvency trading memorandum, are now bouncing back again.

“There was always going to be an increase in the number of insolvencies as things returned to normal,” he noted.

While insolvency rates haven’t yet reached pre-Covid levels, Mr Gammon said increased pressure from rising interest rates and the ATO now taking a more pro-active stance on chasing tax debts, there will be more company directors assessing where their business is at and what they should be doing.

“As a result of that, there is now greater pressure on accountants to assist those directors, reach out to insolvency practitioners and come up with a plan to deal with these challenges,” Mr Gammon stated.

The first half of 2022-23 had already seen a 62 per cent increase in the rate of insolvencies compared with the previous year.

The increase in NSW has been particularly dramatic with the state recording 2153 administration in the first half of the year compared to 2402 in the previous year.

ASIC’s company statistics reveal that this trend has continued into the first quarter of this year.

All appointments over a company including the first, subsequent and transitional appointments have already climbed to 1,575 for the March quarter as at 20 March 2023.

This brings the total number for 2022-23 to 6,415, almost as high as the 6,477 insolvencies recorded over the entire 2021-22 financial year.

The worst hit sector is by far construction, with a total of 1,741 insolvencies.

While the impact of insolvencies this year will be felt across most economic sectors, Mr Taylor said construction, manufacturing and logistics are typically the most prone to insolvency.

Data from the Australian Financial Security Authority (AFSA) has shown that personal insolvencies are also on the rise.

During January 2023, there were 772 new formal personal insolvencies, rising from 612 in December 2022, noted Mr Taylor.

Given the current economic conditions, Mr Gammon said accountants need to reviewing client files on a more regular basis and having tough conversations with their business clients.

“We would like to see accountants being more engaged in reviewing client files not just annually for their tax returns, but maybe once every six months or once a quarter,” he recommended.

“There is a perennial issue where directors either aren't aware [of the issues] or put their head in the sand when things get tight and accountants are very well advised to help them review their liabilities and to look at their cash flow forecasting.

“We are encouraging accountants to reach out proactively to their clients with a view to establishing some dialogue and having these tough conversations.” 

Where issues are identified in the business, the accountant can then work with the business to develop potential solutions, he said.

Mr Gammon also advised accountants to reach out to an insolvency practitioner earlier on for technical advice and options in terms of how things could play out further down the track.

“The earlier that engagement is, the more options that will be available for restructure and a better likelihood of a positive result,” he said.

The Australian Restructuring Insolvency & Turnaround Association has also stressed that having frank discussions early on in the distress cycle is vital for accountants and their clients.

“If you want to keep that client as a long-term client, you need to help them confront the reality of what they're dealing with as soon as possible,” ARITA chief executive John Winter.

“If you suspect that a client is in trouble, try and organise a meeting to sit down with them and talk about what's happening in their business, make sure that they're doing things like keeping their books and records absolutely up to date, so that they know their trading position, make sure that they're not too far behind on their loan and other debt obligations.

“If they are, get them into see a registered liquidator as quickly as possible.”

 Mr Winter said by addressing it earlier on, this can potentially provide businesses with more options such as small business restructuring.

“While the small business restructuring regime is not perfect, it is a tool that’s available,” he said.

“For larger clients, there's always the tools like voluntary administration. There are ways through this and the absolute experts in this area are registered liquidators. They turn around businesses all the time.

“So, if you're able to get a registered liquidator in there early enough, you will keep that client as a long-term client and you will have been a critical part of saving them. That's a relationship that will endure,” he stated.

Mr Gammon said it is also important that accountants handle these conversations with clients with sensitivity and empathy.

“Whilst we're encouraging accountants to reach out and have those tough conversations, accountants should also be aware that it can take a personal toll on the director dealing with some of these difficult issues,” he explained.

“These can be very difficult times so having that degree of empathy and sympathy is very important.”

 

 

 

Miranda Brownlee
23 March 2023
accountingtimes.com.au

 

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Accounting Videos

 

Chris Wybenga

B.Bus, CA

Chris is the Managing Director of the Firm who established the practice in August 1994 and has been responsible for its growth and development since that time.

Chris has over 40-years experience in the Chartered Accountancy profession, predominantly spent in small to medium sized firms, advising both small business and individuals in areas such as taxation and accounting as well as business restructuring and superannuation advice.

Chris is active in the development of young accountants both in mentoring cadets at the Firm and lecturing in taxation for the CA Program for the Institute of Chartered Accountants.

  • 1980 – Commenced employment and part time university studies
  • 1985 – Graduated Bachelor of Business from University of Technology, Sydney
  • 1986 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 1988 – Registered as a Registered Company Auditor
  • 1994 – Established Wybenga & Partners (formerly known as Farrar & Wybenga)

Dianne Bechara

B.Bus, CA

Dianne is responsible for the day-to-day operations and administration of the practice.

Dianne has over 30-years Chartered Accountancy experience and has significant expertise in providing advice and solutions to high-net-worth individuals and their associated entities. Dianne also has considerable knowledge in the areas of taxation, business services, superannuation, and compliance.

Dianne is active in promoting gender equality in the industry through various programs and mentoring opportunities. Dianne is also committed to the development of young accountants and donates considerable time to sharing her expertise.

  • 1992 – Graduated Bachelor of Business from University of Technology, Sydney
  • 1993 – Commenced employment in acounting profession
  • 1996 – Commenced career with Wybenga & Partners
  • 1997 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2002 – Appointed as Director of Wybenga & Partners

Roger Potter

B.Bus, CA

Roger is responsible for the HR aspect of the Firm, cultivating the culture, and maintaining the highly social environment we pride ourselves on.

Roger has over 35-years in the Chartered Accountancy profession and significant expertise in providing advice and solutions to small businesses and high-net-worth individuals. He also has extensive experience in the areas of Self-Managed Superannuation Funds and retirement strategies.

Roger is active in the development of young accountants both in mentoring cadets at the firm and lecturing in taxation for the CA Program for the Institute of Chartered Accountants.

  • 1985 – Commenced employment and part time university studies
  • 1990 – Graduated Bachelor of Business from University of Technology, Sydney
  • 1992 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 1998 – Commenced career with Wybenga & Partners
  • 2002 – Appointed as Director of Wybenga & Partners

Tess Uncle

B.Sc, M.Com, CA

Tess has over 22-years experience in Chartered Firms and in this time has had a broad range of experience in superannuation, taxation, and business services. In particular, Tess has had significant experience in MYOB and assisting clients in day-to-day bookkeeping activities and periodic reporting.

Tess is responsible for the Firm’s training and development needs.

Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities. Tess is also committed to the development of young accountants and donates considerable time to sharing her expertise.

  • 2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2004 – Graduated Masters of Commerce from the University of New South Wales
  • 2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2007 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2016 – Appointed as Director of Wybenga & Partners

Schedule a Meeting with Tess


Adam Roberts

B.Bus, B.Sc, CA

Adam has over 18-years experience in Chartered Firms and in this time has had a broad range of experience in superannuation, taxation, and business services. In particular, Adam has had significant experience in MYOB and assisting clients with periodic management reporting.

Adam is responsible for the implementation of technology in the Firm and sourcing new areas of innovation and efficiency.

Adam is active in the development of young accountants and donates considerable time to sharing his expertise.

  • 2005 – Commenced employment with Wybenga & Partners and part-time Accountancy Studies
  • 2005 – Graduated Bachelor of Science from the University of Western Sydney
  • 2007 – Graduated Bachelor of Business from the University of Western Sydney
  • 2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2010 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2016 – Appointed as Director of Wybenga & Partners

Schedule a Meeting with Adam


Accounting Cadetships

Build your career with expert guidance from our accounting cadetships program, based in Sydney NSW.

Wybenga & Partners offer accounting cadetships at our location in the CBD of Sydney NSW. You’ll receive expert guidance as you work in the industry.

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or send your enquiry now

    Each year we offer several school leavers or undergraduates the opportunity of beginning their career with us via an Accounting Cadetship. If you are interested in pursuing a career in accounting please read the information below. Our accounting cadetships could be perfect for you!

    What is an Accounting Cadetship?

    An Accounting Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.

    How Does It Work?

    Generally, our cadets complete a Bachelor of Commerce (BCom) or Bachelor of Business (BBus) degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.

    The firm provides 3 hours paid study leave per week to attend University. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.

    We take the work life balance very seriously at Wybenga & Partners and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.

    What Are the Benefits of Accounting Cadetships with Wybenga and Partners?

    Our cadets benefit from the following:

    • Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers.
    • Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects.
    • Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career.
    • Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies.
    • Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors.
    • Culture – the Firm promotes a friendly social culture with a number of functions throughout the year.
    • Modern environment – including ‘socialising’ areas such as pool table and break out area.
    • Training – ongoing support and technical training. We also provide internal and external training on a monthly basis.
    • Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months.
    • Professional registered tax agents – Wybenga & Partners are registered tax agents with the Tax Practitioners Board. We use our years of experience and professionalism to provide the best advice and education to you, helping you build your career effectively.

    What Happens When I Complete My Degree?

    The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of your CA Program with the Institute of Chartered Accountants Australia and New Zealand whilst at the same time continuing your employment with us.

    A number of cadets have progressed to Seniors, Managers, and Directors within the firm.

    Who Should Apply?

    Current Year 12 students or first/second year University Students who:

    • want to commence their career in accountancy;
    • are due to commence or are currently completing a part-time business or commerce degree at university with an accounting major;
    • want to gain valuable hands-on experience while completing their qualifications;
    • are looking for a friendly working environment;
    • are team players who display initiative;
    • have a commitment to self-development;
    • possess excellent personal presentation and communication skills; and
    • are motivated and mature minded.

    How Do I Apply for an Accounting Cadetship?

    To apply for a Cadetship position at Wybenga & Partners send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.

    Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).

    What If I Have More Questions?

    For further information about our Cadetship program, please send your enquiry to .

    Skilled Accountants

    Wybenga & Partners offers a stimulating work environment giving you the opportunity to develop your future success.

    Wybenga & Partners recognises and promotes that there is more to life than work. We know that your needs change and we provide support to balance your work, academic and lifestyle pursuits.

    We welcome enquires from trained accountants regarding a career with Wybenga & Partners. Please email us your details to .