ATO’s Firmer Action on Debt
From our February 2011 issue
The ATO has recently issued a fact sheet setting out its revised approach to debt collection titled “Firmer action approach to debt collection”.
This fact sheet sets out when the ATO will take “firmer action” to recover tax debts.
The fact sheet is part of a broader ATO push to wind back some of the concessions offered to taxpayers during the global financial crisis.
What should you do?
If you have trouble settling your tax liabilities, you should contact your tax adviser as soon as possible to discuss the issue as you may be able to avoid firmer action and negotiate a payment arrangement that you are able to comply with.
As set out in the fact sheet, firmer action involves:
• issuing a notice to a third party (for example, a bank) who owes you money or holds money on your behalf requiring them to pay all or part of that money to the ATO
• initiating bankruptcy or wind-up proceedings, beginning with the issuing of a summons/statutory demand
• pursuing company directors personally for the PAYG withholding component of the debt (director penalties)
• issuing a writ/warrant of execution authorising the seizure and sale of your property to pay a judgment debt plus costs
• in rare circumstances, requiring you to pay a bond or provide security in respect of any tax-related liability that the ATO think may be at risk of not being paid.
The ATO will generally take firmer action when:
• the ATO has unsuccessfully tried to contact you multiple times
• you repeatedly default on your payment arrangements
• your debt is escalating and the ATO considers that there is no evidence that you will be able to meet your ongoing tax obligations
• you have been subject to an audit where deliberate avoidance was detected and payment avoidance is continuing
• there is evidence that liquidation is being used to avoid financial obligations, without risking assets and with the full intention of resuming business operations through a new entity (ie “phoenix” activity).
If you have been subject to firmer action of this nature, you should contact your tax adviser to resolve the situation.
If you are able, it is advisable to pay the debt in full as soon as possible.
Otherwise, the ATO will consider deferring firmer action if you make an agreed lump sum payment towards your outstanding tax debt and enter into a direct debit payment arrangement for the balance of the debt.
If you have a debt of greater than $100,000, you will need to demonstrate that your business is viable before the ATO will defer the firmer action.
This information is for guidance only and is not intended as specific advice to any reader. Professional advice should be obtained before acting on any information contained herein. The publisher accepts no responsibility for loss occasioned to any person or organisation as a result of action or the refrain of action as a consequence of the contents of this publication.