[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_column_text]During the past two years of the COVID Pandemic, it is well known that the Australian Taxation Office (ATO) has undertaken limited recovery action of outstanding tax debts.
We have recently been contacted by several accountants whose clients have received letters from the ATO, providing an early warning of the ATO’s intention to issue Director Penalty Notices (DPN) if arrangements are not made to make payment of the outstanding debt.
We understand that some 50,000 of these letters have been sent to directors, signaling the ATO’s intention to commence recovering a tax debt that either has ballooned during the COVID period or may indeed be an overhang from pre-COVID times.
Early Action is Key
Where your client is in receipt of one of these letters, your client must immediately react by either:
- Making payment of the outstanding tax debt in full; or
- With your help contacting the ATO to make suitable arrangements for the payment of the debt (e.g. a formal payment arrangement).
We expect that where no contact is made or a satisfactory agreement is unable to be reached, the ATO will commence recovery action (and without further notice).
In previous articles, we have written about the ATO’s recovery options (read more here) when dealing with outstanding tax debts, which include:
- Garnishee Notices;
- DPNs; and/or
- Statutory Demands.
Whilst the letters have indicated that the ATO may issue DPNs, there is no requirement for the ATO to only take that step and it may take any of the above steps if it so chooses.
DPN Consequences
Recent legislative changes to the DPN regime (article explaining these changes available here) no longer relieves a director from personal liability if the company enters into a repayment arrangement. Accordingly, the only options for a director to avoid personal liability for their company’s tax debt are:
- Payment in full of the amount listed in the DPN; or
- A formal insolvency process (i.e. Administration, Liquidation or Small Business Restructuring Practitioner be appointed).
Where the ATO has indicated it will issue a DPN, early action is required as unless payment in full of the debt can be made, there is no way of avoiding personal liability without a formal insolvency action once the DPN is issued.
Should you or your client wish to discuss their options or consequences of dealing with an outstanding ATO debt, please contact SV Partners for a confidential, free and no-obligation discussion.
Article written by Travis Olsen (Associate Director) – SV Partners Adelaide[vc_empty_space][/vc_column_text][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][social_share_list][/vc_column][vc_column width=”1/3″][qode_button_v2 target=”_self” icon_pack=”font_elegant” fe_icon=”arrow_left” hover_effect=”” text=”Back to the Blog” link=”https://svpartners.com.au/bottom-line”][/vc_column][/vc_row]