1300 310 469 info@tdsau.com.au
Specialist in tax negotiations in australia

The ATO restarts debt collection.

Over the last couple of years, the ATO was not actively chasing unpaid taxes. Their debt book increased from $20 billion to $52 billion in just a few years, with a large portion of this acquired since COVID-19 commenced. Did you know that the ATO did stop collecting debt during 2020 and even stopped applying interest to debt? Never in history has the ATO stopped collecting debt for such a significant period. It’s understandable; how could a government agency issue grants, loans and JobKeeper payments with one hand and collect money with the other. What a holiday for some businesses and individuals!

The holiday is over, with the ATO now making very clear warnings of firmer action on debt recovery and stating they will not necessarily inform taxpayers before taking action.

50,0000 newly designed warning letters were issued in March specifically warning of the issue of Director Penalty Notices to directors if company tax debt continues to go unmanaged. It would be reasonable and to expect the ATO to issue said Director Penalty Notices in June, right after the election and wise for those with tax debt to prepare and plan.

Where businesses run into trouble and find themselves in arrears.

How does someone get themselves into such a sizeable debt?

That will never happen to me! I pay my taxes on time, you say!

No matter how compliant you are things can happen. You never know when your largest client will decide to end the project that your business heavily relies on. The staff employed for the now-cancelled project must be paid because you can’t afford to lose valuable, skilled employees and there goes your cash flow. It’s never just wages. There are entitlements and running costs, ongoing expenses that you can’t recuperate.

Unforeseen circumstances and dilemmas can derail your success.

Maybe you had no idea that your trusted office manager was helping themselves to cash flow over the last two years. Or worse, you never expected you’d fall ill, and in your absence, sales dropped significantly, impacting the businesses’ income.

Every business owner’s first instinct is to survive all the hurdles that come their way, keep the business going, keep staff employed, and do whatever it takes to keep those wheels turning. We as business owners do not try to rack up tax debt, but when our back is against the wall, when things beyond our control put a financial strain on our business, we just try to survive.

Trading out of debt.

With JobKeeper gone, this will mean the beginning of the end, and liquidation is the inevitable destiny for some businesses. For others, it’s just a matter of having the right people in the right position to help guide you through.

I’ll never forget a conversation I had with an ATO officer in their wind-up area. I asked if he thought there were a large number of businesses that the ATO wound up that could have traded out of debt, and his answer was a resounding YES! There is no doubt that sometimes it’s commercially sound to decide to liquidate your company, but sometimes you just haven’t considered the alternative of trading out.

When hard times hit, you need extra time to get you through challenges, such as a downturn in business, damage such as fire or flood, or a once in a century pandemic. It’s so important that we as business owners have maintained good relationships with landlords, suppliers, BDM’s etc. We should lean on those relationships to negotiate an arrangement because most people are understanding and appreciate your effort to communicate with them.

For the ATO, it’s always been about ensuring an even playing field, so our competitors aren’t receiving an advantage over us while we pay our taxes on time. Commercial negotiations don’t work with the ATO.

Working together for a successful resolution.

The next couple of years will be about recovery for many businesses—especially within the industries feeling the most impact, such as hospitality, arts, fitness centres and travel. They will need trusted advisors more than ever before, and as advisors, we all must collaborate and work together to achieve positive outcomes.

For confidential advice and tailored debt solutions, contact TDSA. Our extensive experience and knowledge of the workings of the ATO mean we can negotiate effectively on your behalf or on behalf of your clients with a detailed outline of available options.

Let’s find your path to recovery.

📩 info@tdsau.com.au

📞 1300 310 469

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