I’m suddenly not too popular with my local cafe after I showed her the new edition of Keay’s Insolvency, the title of which set her off on a bit of a tirade.

Before I could say much she told me her recent experience. 

A’s successful cafe

She operates her cafe quite successfully through a company.  She pays her employees properly, reports tax and otherwise is legally compliant. Her success is in the quality of her service and her food. She has a loyal following.

In some friendly competition, cafe B is similar and it also operates successfully.

C’s less than successful cafe

But then there is cafe C which A and B are both a bit puzzled by.  C doesn’t quite have the same quality of food, its staff are indifferent, it pays little attention to presentation but somehow it seems to be still there.

Then, when creditors including the ATO started to serve demands on C, C joined the clamorous group saying the ATO was being too tough.  

Because of A’s sale of surplus coffee to C, which C never paid for, A gets a notice about C’s “small business restructure”. The story is that C in fact has accumulated tax debts, debts owing to suppliers, and owing to employees, including super.  But it is “viable”.

SBR

As A tells me, “poor old C” managed to cut its debt by more than half through a “small business restructure”. A doesn’t know the details but suddenly C is now out there relieved of around $200,000 of its debt.  Who wouldn’t be viable with that tax write-off.

A is not happy, nor is B

They both realise that C was trading for some time, tax free.  That’s hard to compete with.  In fact, their revenue has been in some decline and they were wondering why.

A did not want to talk to me further. 

I wouldn’t like to think she might take the same route as C? 

Coffee

She did serve me the coffee I ordered, but it was warm.