While the Australian Taxation Office put most overdue tax collections on hold during the COVID-19 pandemic, this is now no longer the case.
In recent months, the ATO has been contacting taxpayers and informing them about their potential personal liability for company tax debts under the Director Penalty Notice (DPN) program.
The letters have been sent to directors of companies if the company has not met their debt obligations in respect of PAYG withholding, Superannuation Guarantee Charge and GST.
Directors are being notified that the ATO are considering issuing them with a DPN, which makes them personally liable for the debts of their business if the company does not actively manage their debt.
If you have outstanding debts, you must act now
If the ATO issue a DPN, the option to enter a payment plan is not available, so it is important to act now.
Calibre’s experiences with the ATO suggest that they are not motivated to pursue Director Penalties, provided a payment plan is entered into to extinguish the debt and the payment plan is being followed.
Contacting the ATO and negotiating a payment plan is critical to avoiding a DPN being issued, so be proactive don’t wait. Once a DPN is issued, you only have 21 days to settle the debt or pursue insolvency options which leaves little time to make effective decisions.
If solvency is an issue, other options exist
If solvency is an issue, encouragingly, the ATO is generally supportive of formal debt restructuring proposals. In particular, the Small Business Restructure (SBR) process is an alternative option to a payment plan provided a viable underlying business can be demonstrated.
The SBR process prevents directors from being individually liable for insolvent trading but unlike any other insolvency procedures, business owners remain in control of their business during the restructure.
If you have an outstanding tax debt or have difficult meeting the terms of a payment plan, feel free to contact Calibre Business Advisory to learn more about how we can help you.