For a significant number of individuals and businesses, the ATO is their largest (or only) creditor. Tax debts bring down a massive amount of individuals and business every year. A tax debt can arise for any number of reasons, but are commonly because of:
- Cashflow constraints – the money that a business has may be needed to pay suppliers and employees (for instance). After all, the ATO doesn’t provide you with any goods or services does it?
- Accountants and/or bookkeepers may drop the ball and fail to lodge one or more tax lodgements.
Outstanding Tax Lodgements
If you do have unlodged tax lodgements it’s vital that you don’t just lodge them all at once without planning for the ATO’s response. Check out this article for help on what to do before lodging late tax lodgements. Just simply lodging these lodgements can result in serious repercussions for you or the company, including the ATO:
- Raising assessments for general interest charge and late lodgement penalties, thereby increasing the overall tax liabilities;
- Issuing Director Penalty Notices to the company’s directors which may make them personally liable for the company’s PAYG and/or superannuation debts;
- Issuing Garnishee Notices to the company’s or individual’s bank, debtors or employer requiring the bank(s), debtors or employer to pay funds held on behalf of the company or individual, or payable to the company or individual, to the ATO; and/or
- Commencing action to wind up the company or bankrupt the individual.
ATO Payment Arrangements
It is important for individuals or companies that fall behind in their tax obligations or who have a tax debt to actively engage with the ATO. If the ATO is ignored they are more likely to take the enforcement action set out above.
At Cactus Consulting we commonly work with company directors and individuals that have tax debts and want to negotiate a payment arrangement with the ATO. While we recommend that company and individuals are proactive in their dealings with the ATO, we also provide assistance and advice to directors and individuals who have significantly overdue tax debt and lodgements including in circumstances where the ATO has already taken some form of recovery action.
Some successful ATO payment arrangements include:
- We assisted a large transport company to negotiate its 9th payment arrangement with the ATO in respect of debts totalling more than $300,000. The ATO also wrote off all of the interest and penalties charged on the income tax debt.
- 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 filed against a member of the group.
- We assisted a company’s directors negotiate an ATO payment arrangement in respect of Director Penalty Notices issued following a voluntary administration and deed of company arrangement. We negotiated to reduce the amount of the ATO’s DPN assessment by over $150,000, allowed for an adjustment of likely DOCA dividends and arranged for the balance to be paid over three years.
If you or your company has a tax debt or oustanding tax lodgements and need some advice on what to do, then get in touch on 1300 4 CACTUS or by email to email@example.com today.