The shock of the 2011 natural disasters hit many Australian’s hard, both as a community and commercially. After what now seems to be a short reprieve in the scheme of things, we are again facing hard times of a different nature.
We were fortunate in the months of recuperation to have our government’s support and all manner of financial relief and incentives. The Australian Taxation Office (ATO) declared
“As I have said in the past, during these difficult times our message is clear to the public, look after yourself, your family, community and property first and don’t worry about tax – we can sort things out later.” Commissioner of Taxation. Michael D’Ascenzo February 2011.
During this period of ‘let’s sort things out later’ many businesses still were accruing tax and literally were putting off payment to be dealt with later. It appears that later is now.
The ATO’s annual report for the 2010-11 year illustrates that while collectable debt was down by 0.6 billion dollars, insolvency debt has increased by 1.4 billion dollars. The correlation between these types of debt appears indicative of action taken in recent months and is now forming the landscape of 2012.
December 2011 saw two new ATO initiatives being rolled out, the legal profession data matching project and boat owner data matching.
The Queensland Law Society was served by the ATO with a notice to provide information on its members in accordance with the Income Tax Assessment Act and the Tax Administration Act. In addition to this scheme the ATO is undertaking data analysis from more than 110,000 people who own boats worth more than $25K and comparing this information with declared income.
The Courts were also flooded (pardon the pun) in December 2011, with the majority of all hearings being initiated by way of ATO applications.
Under the ATO’s “Firmer Action Policy”, which was released in December 2010 as a fact sheet for ‘taxpayers with a debt’, the ATO has advised there will be a strong focus on taxpayer viability. This is assessed under six key elements in deciding if it will in essence allow a business to continue, these being:
Net assets and working capital position;
Debtors and creditors; and
Availability of debt funding
As part of the ‘firmer action’ process we have seen a marked increase in the number of garnishee orders being issued by the ATO. These orders can be issued to a range of 3rd parties. In delivering our February seminar series on ‘The Taxman Cometh’ it was of great surprise to many professionals that garnishee orders can also be issued to superannuation funds.
Our message is that the ATO is coming down on outstanding debt. Its leniency to taxpayers in the past now seems to be a thing of the past. It is wanting resolution to files even if that means bankruptcy or liquidation.