The ATO has taken virtually no recovery action to collect tax debts since the start of the Covid-19 pandemic. This has led to many businesses who have been unable to pay tax debts, simply racking up more debt. As a result the total tax debt owed has increased significantly as set out in the table below:Further, it is thought that the total collectable tax will reach around $50 billion at 31 December 2021. This is nearly twice what it was prior to the Covid-19 pandemic.
What are the future risks for businesses and directors?
The ATO are now beginning to take recovery action to collect tax debts. This can result in companies being placed in liquidation by the ATO or the ATO issuing Garnishee Notices, most likely to take funds from a company’s bank account.
The main risk for directors is the ATO issuing Director Penalty Notices. These notices can make directors liable for certain company tax debts.
What should you do
You should engage with the ATO is now. The ATO are now more likely than ever to agree to payment arrangements, including payment arrangements over a number of years. If you don’t think you can pay a tax debt to the ATO, even over time, you should consider trying to settle the debt through voluntary administration or small business restructuring. Or if this is not feasible, then look at liquidation.
How we can help
We often assist clients with negotiating payment arrangements or settlements with their creditors. These can range from negotiating payment arrangements with the ATO, to negotiating a settlement of a commercial lease debt. A business may even take advantage of the newly proposed small business restructuring process to avoid liquidation and allow the business to ease up much needed cash flow.
So, if you wish to explore all the options that may be available to your business, get in touch with us on 1300 906 966 or send us an email at firstname.lastname@example.org to arrange a free confidential initial discussion.