For a significant number of companies, the ATO is their major creditor. Often for reasons outside the control of those companies’ directors a company is for a period of time unable to pay the full amount of its due and payable debt to the ATO. This can often result in serious consequences for the company, including the ATO:-
- Raising assessments for general interest charge and possibly penalties, which will increase a company’s tax liabilities;
- Issuing Director Penalty Notices to the company’s directors which may make the directors personally liable for the company’s PAYG Tax debts and possibly unpaid superannuation;
- Issuing Garnishee Notices to the company’s bank(s) or debtors which require the bank(s) and debtors to pay funds held on behalf of the company, or payable to the company, to the ATO; and/or
- Commencing action to wind up the company by issuing a Statutory Demand and then filing a Winding Up Application.
It is important for companies which fall behind in payment of their tax obligations to be proactive in their dealings with the ATO, as if discussions are not commenced with the ATO regarding the manner in which tax debts may be settled, the ATO is more likely to take the action set out above.
At Pearce & Heers we commonly assist company directors and their accountants review a company’s financial position including debts owed to the ATO, discussing risks associated with a company’s circumstances and formulating a manner in which to deal with the company’s problems. Often this may involve us making a proposal to the ATO on the company’s behalf for a payment arrangement which sometimes can involve the ATO agreeing to reduce interest and penalties which it has assessed.
Whilst we recommend that company directors are proactive in their dealings with the ATO, we also provide assistance and advice to directors who have significantly overdue tax debts and lodgement obligations including in circumstances where the ATO has already taken some form of recovery action.
Examples of Successful Negotiations with the ATO
We assist in negotiating numerous payment arrangements for companies with the ATO each year, however, some of the matters we have successfully dealt with in the past are as follows:-
- We assisted a large transport company negotiate its 9th payment arrangement with the ATO in respect of debts totalling several hundred thousand dollars, which included the ATO writing off a portion of the interest and penalties which it had charged the company.
- We provided advice and assistance to a group of civil contracting companies including assisting to negotiate a payment arrangement with the ATO which resulted in the ATO withdrawing a winding up application which it had filed against one of the companies.
- We assisted a company’s directors negotiate a payment arrangement (from the company) with the ATO in respect of amounts claimed by the ATO, totalling several hundred thousand dollars, which the ATO was claiming against the company and its directors as a result of Director Penalty Notices issued.
- We have on numerous matters assisted a company’s accountant put forward a proposal for a payment arrangement to the ATO in circumstances where we considered that it was warranted for the accountant to do so, rather than the company engaging us to make the proposal.