Lately, we have seen a lot more activity from the ATO around debt collection and threats of prosecution for tax payers with outstanding tax returns and BAS lodgements.
A recent report from the Inspector-General of Taxation revealed that collectable tax debt has grown over the decade to $20 billion in the 2013/14 year.
Like any creditor the best course of action is to communicate with the ATO if you have an outstanding tax debt. They are generally willing to accept a payment arrangement (often up to two years) depending on the circumstances. Recently we have had a lot of success in having the general interest charges (GIC) remitted after the primary debt has been paid, including $43,000 in GIC being wiped for a client.
However, if no contact is made with the ATO for a prolonged period, and no payment arrangement is put in place, then a garnishee notice could be issued, allowing the ATO to access your bank accounts, or even a statutory demand which if ignored could lead to personal bankruptcy.
If you receive a Director Penalty Notice from the ATO in relation to unpaid PAYG Withholding, you should contact your professional advisor immediately.
If the unpaid amount is not paid in full (or an arrangement is in force under s. 255-15) within 21 days of the notice, or if the entity with the liability is not under administration or being wound up the director becomes personally liable for the outstanding PAYG Withholding amounts.
If you receive notices requiring lodgement of your outstanding returns it is important that you act quickly to avoid sterner action. Sterner action can include default assessments, fines, and even jail time to name a few.
We recommend that you keep up to date with your tax and BAS lodgements to avoid additional scrutiny from the ATO, and if you are unable to pay a tax debt in full be proactive in speaking to them early and put a payment arrangement in place that is affordable for you.
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.