THE ATO IS COLLECTING THE DEBT

No doubt you’ve heard in the headlines that Australia has a large deficit and our current Government blames the former Labour Government. Over the last few months, we’ve noticed a more hard ball approach by the Australian Taxation Office (ATO) to enforce lodgement of tax returns and BAS and collect outstanding tax debts.

The ATO has turned up the pressure on us tax agents to get your tax returns lodged on time but worst of all, they are on a war path to collect the debt. We have experienced two clients receive a writ of summons in the last two weeks! They both had payment arrangements in place and were in regular contact with the ATO. It wasn’t a case of them not responding to ATO correspondence or flying under the radar. Very aggressive conduct indeed!

It seems that the ATO are sending a clear message that they will increase their activities to identify and recover unpaid taxes, improve internal systems to capture more information on the taxpayer and initiate enforcement activities at an earlier stage.

The figure below shows the increase in the ATO initiated winding up applications during the last six (6) months through the Federal Court of Australia:

Figure 1. ATO Federal Court winding up application Dec 14 to May 15

There has also been an increase in the use of the ATO’s other powers to recover outstanding amounts, which include garnishee notices and director’s penalty notices.

We’re also seeing some other discerning factors that the ATO are on a rampage:

• Less adjournments in the winding up proceedings are taking place. This means the ATO is not allowing additional time for the taxpayer to get their financial affairs in order; and
•  When negotiating a payment arrangement for a corporate entity, the ATO are now referring to the director’s personal compliance history where previously the affairs were considered independently.

It is evident by the increase in activity by insolvency practitioners (liquidators) that the ATO is serious about collecting their debts. Not only are small businesses faced with uncertain economic times but they are now forced to deal with this toughened approach.

The above activity is consistent with the Commissioner’s speech at a recent Tax Institute Convention. In it, he discussed the ATO’s approach to Debt Management i.e. collecting unpaid taxes – calculated by the ATO to be $19.5 billion in 2013/14 (up from $14.5 billion in 2009/10).

The Commissioner advised that the ATO’s new approach includes:  A more flexible and tailored approach to payment arrangements;

•  Earlier intervention to prevent the escalation of debts;
• A focus on a business’s viability;
• Legal enforcement at an earlier stage;
• Updated communication techniques – including simpler letters and utilising electronic communication techniques, including email, SMS and myGov channels.

If you’re experiencing difficulty in paying your ATO debt, don’t bury your head in the sand. Contact the team at Optima Partners so we can negotiate a payment arrangement with the ATO on your behalf. It’s better to be upfront with them rather than trying to hide from them. If your situation is dire, we have professional relationships with insolvency practitioners that may be able to assist, if need be.