Taxpayers and Company Directors know the Australian Taxation Office (ATO) holds special powers beyond the usual debt recovery strategies. In recent years those powers have expanded.
The ATO's powers now extend to Director Penalty Notices, garnishee orders to third parties, estimates and default assessments. Not complying with the ATO's requirements can have serious implications. You therefore need to be informed, lodge company statements on time and keep your books in good order.
The ATO have confirmed their tough stance on non-complying businesses regarding unpaid tax liabilities. Their focus is particularly on companies that:
- Default on payment arrangements repeatedly;
- Avoid financial obligations by liquidating companies and setting up new business entities (phoenix activity);
- Experience escalating debt with no signs of being able to meet their obligations;
- Avoid contact with the ATO
With the ATO's powers expanding since June 2012 when legislative amendments came into force, Directors and Companies must:
- Keep payments and contributions up to date.
- Communicate with the ATO
The ATO may issue one of the following proceedings against Directors and Companies:
- Standard Director Penalty Notice - The ATO will issue a standard DPN when the company has lodged its Business Activity Statement (BAS) or Instalment Activity Statements (IAS) but has not paid the debts.
- Lockdown Director Penalty Notice - This is triggered when the company fails to lodge its PAYG and/or SGC returns to the ATO within three months of their lodgement due date.
- Garnishee Notice - The ATO has the power to order a third party (eg a bank) who owes the company/director money to pay it straight to the ATO. The notice can ask for either a percentage of wages or a lump sum amount.
- Estimates and Default Assessments - The ATO can estimate an outstanding PAYGW or SGC liability on behalf of the company and give notice to the company of their reasonable estimate.
4 Things Directors Should Do to Avoid the Long Arm of the ATO:
- Ensure their ASIC details and records are up to date;
- Report their BAS and Superannuation Guarantee Charge statements on time;
- Be proactive and timely about obtaining advice;
- Keep up to date with their PAYG and SGC payment obligations.
Source: Rapsey Griffiths 20/0314 www.rapseygriffiths.com.au
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.