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Small business under pressure as tax office claws back $34 billion

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Amidst a slowing economy, small businesses in Australia are facing increasing pressure from the Australian Taxation Office to settle debts amounting to over $34 billion.

The ATO’s aggressive debt recovery tactics have raised concerns, with experts warning that the rate of insolvencies may soon reach levels not seen since the aftermath of the global financial crisis.

Sectors already grappling with economic challenges, such as construction, hospitality, and retail, are bearing the brunt of these actions.

While the ATO is not the primary initiator of winding-up applications in court, its intensified debt recovery measures, coupled with a deteriorating economy, are exacerbating the situation for struggling businesses.

The total collectible debt, as reported by the ATO, has surged to $52.4 billion by the end of December 2023, with small businesses accounting for a significant portion of this amount.

Old debts

The ATO has intensified its efforts to recover old tax debts, further straining individuals’ financial stability.

Jarvis Archer, Head of Business Restructuring at Revive Financial, noted a marked increase in company insolvencies in recent months, surpassing both pre-COVID and post-GFC levels.

He attributed this trend to the combination of aggressive ATO debt recovery actions and a slowing economy.

Archer highlighted the ATO’s utilization of various debt recovery tools, including director penalty notices and garnishee notices, to compel compliance.

The practice of issuing garnishee notices has attracted criticism for its adverse impact on small businesses, as documented in recent investigations and reviews.

Business insolvency

Independent MP Andrew Wilkie voiced concerns over the ATO’s approach, warning that it could drive more small businesses into insolvency. He emphasized the need for a more balanced and sensible debt recovery strategy.

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Money

Workers rush back to their desks over job fears

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Workers across Australia are rushing back to their desks, driving office utilisation rates to their highest levels since February 2020.

Tuesdays, Wednesdays, and Thursdays emerge as the busiest in-office days, contrasting with the continued reluctance to return on Fridays.

This insight, drawn from XY Sense data based on 18 enterprise customers in Australia employing approximately 68,000 individuals across 127 buildings, reflects a significant shift in workplace dynamics.

The surge in office attendance coincides with a resurgence in workplace attendance mandates and policies linking physical presence to bonuses and performance reviews.

However, co-founder of XY Sense, Alex Birch, suggests that rising job insecurity, rather than these policies, primarily drives this behavioral shift.

“The pendulum has moved towards the employer, and therefore people feel more obliged to go back into work,” commented Mr. Birch.

Job market

Danielle Wood, chairwoman of the Productivity Commission, anticipates this trend to persist as the job market softens.

She notes a disparity between employer and worker perceptions regarding the productivity benefits of hybrid work arrangements, hinting at potential shifts in the employment landscape.

Meanwhile, economists at the e61 Institute observe a partial reversal of the pandemic-induced “escape to the country” trend.

Rent differentials between regional and capital city dwellings, which narrowed during the pandemic, are now widening again.

This trend suggests a diminishing appeal of remote work options and a return to urban commuting.

Aaron Wong, senior research economist at e61, said the emergence of a “new normal,” characterised by a hybrid lifestyle that blends access to office spaces with proximity to lifestyle amenities such as natural landscapes.

While regional rents decline, rents for homes on the urban fringe surge, reflecting evolving preferences shaped by remote work opportunities.

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Why resilient economy is fuelling demand for Australian property

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Despite inflationary pressures, Australian house prices have surged to a record high for the fifth month in a row, as indicated by CoreLogic data.

Australian house prices have not only weathered inflation but have also soared to unprecedented levels, marking the fifth consecutive month of record highs, according to data from CoreLogic.

This resilience reflects the enduring demand for property in the country, showcasing the sustained interest of buyers despite challenging economic conditions.

VentureCrowd’s Head of Property, David Whitting, talks how investors can access alternative ways of property investing.

Presented by VentureCrowd #funding futures #housing #economy

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Money

Three reasons why you don’t need to panic about inflation

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Inflation in the US has exceeded expectations for the third consecutive month, driven by increases in essential commodities such as oil, electricity, takeaway food, and medical costs.

  1. Despite a 3.8% year-on-year rise in CPI, it’s notable that this figure has decreased from its previous 9% high.
  2. The robust CPI and economic growth numbers suggest a positive outlook for US corporate earnings.
  3. The S&P500 has seen five 1% drops this year, all of which were met with investors buying the dip.

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