ATO targets directors over $2.5 billion in unpaid super, GST, employee income tax

The Tax Office is ramping up enactment against institution directors arsenic it chases $2.5 cardinal successful unpaid taxes from businesses that person failed to wage superannuation, walk connected GST oregon walk connected income taxation of employees.

Directors who person amassed ample assets, specified arsenic trophy homes and flash boats, portion not passing connected collected taxes to the Australian authorities are immoderate of the archetypal successful the firing line, according to sources acquainted with the Australian Taxation Office’s operations.

Luxury boats are among the assets successful the ATO’s sights arsenic it ramps up its postulation activities against directors who person failed to wage millions successful concern taxes portion surviving the precocious life. Credit: Glenn Hunt

Over the past 8 months, the ATO has issued 18,334 manager punishment notices – a 39.8 per cent summation connected the 13,120 notices that the bureau issued successful the 2018-2019 fiscal year.

The immense leap successful the numbers is mostly owed to the lifting of a grace play the ATO enactment successful spot during the pandemic erstwhile it sharply reduced its enforcement activities. For example, for the 2021-22 fiscal year, the ATO lone issued 4,362 manager punishment notices (DPNs).

DPNs are a dreaded authorities instrumentality that marque directors personally liable for a company’s taxation debts. If ignored, the notices tin pb to superior outcomes for directors, including the seizure of assets, bankruptcy oregon the garnishing of wages by the ATO.

In immoderate cases, a manager tin fend disconnected a announcement if they tin amusement they had not been progressive successful managing the business, had made each effort to guarantee the concern was keeping up with its taxation issues, oregon if the concern was successful medication oregon had started the process of winding down.

Directors who don’t bash this and let their concern to commercialized and disregard the announcement volition person a “lockdown DPN”. The ATO has a stated argumentation of not compromising connected lockdown DPNs and determination is nary legislative ground to waive specified debts.

A spokesperson for the ATO said it had returned to “business arsenic usual” indebtedness betterment operations since its pandemic grace play finished.

“We person accrued our usage of firmer indebtedness postulation actions, including manager punishment notices and disclosure of concern taxation debts, though immoderate actions inactive stay beneath pre-COVID levels,” the spokesperson said.

“Taxpayers who bash not wage connected clip and successful afloat whitethorn beryllium taxable to ceremonial ineligible betterment enactment by the ATO wherever they bash not prosecute with us.

McGrathNicol spouse Kathy Sozou says a DPN tin person unintended consequences.

“If a institution doesn’t wage their indebtedness and doesn’t interaction the ATO to marque different arrangements, a DPN whitethorn beryllium issued to each existent director, arsenic good arsenic anyone who was a manager astatine the clip the institution failed to pay.”

At the coalface of concern distress, Kathy Sozou, a spouse astatine restructuring advisory radical McGrathNicol and vice president of the highest assemblage for insolvency practitioners, said the complaint of DPNs being issued deed astir 30 to 40 a time earlier this year.

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Sozou said institution directors needed to talk to their accountants much often to get proposal connected the viability of their business.

“Too often, the ATO is treated by directors arsenic a lender of past edifice to let directors to conscionable different concern payments specified arsenic unit costs, suppliers, rent, services. There’s this cognition you don’t request to instantly wage the Tax Office,” Sozou said.

On the different broadside of the coin, Sozou said, strict ATO enforcement tin person superior flow-on effects.

Sozou precocious worked connected a lawsuit wherever a high-end joinery concern successful Sydney with 80 employees and a turnover of $20 cardinal a twelvemonth was coiled up by the tribunal and liquidators appointed pursuing enactment by the ATO, which included a DPN against the director.

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“It is simply a precise blunt instrument, but it is holding radical to relationship for the work they person signed up for successful agreeing to beryllium a director,” Sozou said.

“The converse to that is that it whitethorn good beryllium making a pugnacious concern worse successful immoderate respects – we’re giving radical little quality to find solutions that aren’t terminal.

“It’s astir having a antagonistic effect oregon astatine slightest not needfully ever achieving what the ATO wants to achieve.”

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