SA seltzer brand South Ave plunges into voluntary administration after tax audit backfires

A popular South Australian seltzer company has collapsed after a voluntary tax audit backfired, leaving them with an unpaid bill from the ATO.

South Ave, a popular alcoholic seltzer brand from South Australia, was plunged into voluntary administration on Wednesday.

It comes days after the company, which produces pre-mixed vodka and seltzers, celebrated its fifth birthday.

Co-founder and chief executive Reno Marrasso told Adelaide Now the company completed a voluntary tax audit last year, only for the ATO to demand a fast-tracked repayment plan of $13m in unpaid excise duties.

The seltzer company was founded in 2021 by Mr Marrasso, Scott Grieve and Sophie Sexton, and generated almost $19m in annual revenue, the majority of its sales coming from South Australia, Victoria, Queensland and Western Australia.

Mr Marrasso said the company had no choice but to file for voluntary administration despite paying off “a good chunk of that debt”.

“For a period with the ATO we kept being told we were in credit with excise, and we thought this doesn’t make sense, so we ended up choosing to do a voluntary audit. Unfortunately, as they say, sometimes honesty isn’t the best policy, but we did a voluntary audit and figured out we actually had a $13m excise debt,” he told the outlet.

“We went on a three-year payment plan, and that was going really well – in the last 12 months alone we were able to pay down a good chunk of that debt.

Mr Marrasso said due to the voluntary administration, the ATO “changed their term from three years to 12 months”.

“And for us a 12-month time frame is never going to be feasible because it would just completely destroy the cash flow of the business. There’s no way to pay $1m a month essentially on that debt, plus trade with paying more excise on new product, especially while we are still growing at such a rapid,” he said.

Mr Marrasso said despite the business filing for voluntary administration, it would continue operating under the control of the administrators.

He said he would develop a repayment plan with creditors – a deed of company arrangement proposal (DOCA) – allowing him to retain control of the company again.

“The brand is still firing – it’s probably the busiest it’s ever been and we’re still growing at a rapid rate,” he said.

“We looked at this as an opportunity to restructure and recapitalise the business, to actually get some more funds in and to then take it to that next level.”

Mr Marrasso explained there would be no changes to its staff roster as the DOCA proposal is organised.

“We’re not looking at any change in staffing … we have 18 staff members and they’re all keeping their jobs,” he said.

“I’ve already got a road map to take the business out in a DOCA proposal to then take us into the next phase of growth for the business.”

NewsWire has contacted South Ave and the ATO for comment.