The Australian Tax Office (ATO) is currently owed approximately $20 billion – that is, “billion” with a “B”. Many individuals and businesses are grappling with their tax obligations, seeking guidance from a trusted tax advisor.
During the Global Financial Crisis (GFC), the ATO was relatively lenient on outstanding tax debts. It encouraged taxpayers and small businesses to enter payment plans to pay off their outstanding tax debt instead of the ATO commencing legal action to prosecute for recovery.
This lenience appears to have been taken advantage of by numerous taxpayers and small businesses, as the debt has doubled since the start of the GFC. Small businesses are the main offenders of late payments.
Since April this year, the ATO has substantially increased its debt recovery efforts by applying to wind up (or close) more than 400 companies per month, up from an average of 90 per month.
Winding up is usually used as a last resort by the ATO, with it generally attempting to recover unpaid tax via payment plans, director penalty notices or garnishee notices first. However, this is not working.
In a recent speech, the Commissioner of Taxation, Chris Jordan, stated, “We are dealing with people who are not doing the right thing or paying the right amount. We will be taking legal action earlier when warranted. This means initiating winding up action where there is evidence of insolvency.”
We have seen increased debt recovery action by the ATO in the last few months. Mostly special debt notices and phone calls. But where these notices and phone calls result in no payment or communication by the taxpayer or small business, the ATO has advised they will proceed to the next step and initiate legal proceedings, which can include winding up.
Please tell us if you have any outstanding tax before the Tax Office takes action.
*Correct as of September 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
