The Australian Taxation Office (ATO) is taking a harder line on businesses failing to pay taxes, issuing at least twice as many wind up notices as normal.
The Canberra office of RSM Bird Cameron, a national accountancy firm, says it has noticed the ATO has significantly ramped up applications for winding up in the last six weeks. In the Federal Court in Canberra last Friday there were 13 applications when there are normally two.
RSM Bird Cameron Managing partner Frank Lo Pilato says applications by the ATO to wind up companies in April were more than double the March tally and the May numbers reflect even higher activity.
“This indicates a clear change of focus and increased enforcement for the ATO,” he says. Lo Pilato, who both advises businesses and acts as a liquidator, says he’s never seen the ATO come down so hard before.
“For the ATO this is like a blitz,” he told Business Insider. “Closer to an election there’s less activity. Now we’ve got a budget deficit so there’s a need to collect money. I think there’s been a change with Chris Jordan (ATO Commissioner), he’s come from a private background.”
During the GFC, the government took a softer approach. But the ATO is now warning businesses legal action will be taken earlier. A wind up notice, where a liquidator is appointed by a court, is the last resort.
The ATO says it’s taking a “timelier and stronger” approach to prevent businesses from gaining an unfair financial advantage over those paying their tax on time.
“The majority of people pay tax debts on time or shortly after, but a small number don’t pay at all,” Assistant Commissioner Thomas Ryan told Business Insider.
Ryan says the ATO is more actively using statutory and legislative powers including broader use of garnishee notices, which require third parties including banks, to pay tax money owed.
The ATO is also looking at other statutory powers, such as penalty notices for directors who are personally liable where businesses have failed to pay employee superannuation entitlements.
“These changes do not affect the support and assistance the ATO continues to provide to taxpayers who are having difficulty paying but are willing to work with us,” Ryan said.
RSM Bird Cameron’s Lo Pilato says the ATO is more aggressively pursuing debts as low as $100,000.
“Any business with an outstanding taxation debt of $100,000 and no current repayment arrangement in place is at risk of being wound up by the ATO,” Lo Pilato says
He says it’s clear many small businesses are using unpaid superannuation, GST and PAYG as an artificial form of finance.
“Where companies are wound up, unfortunately it is usually the employees who suffer most, as although other entitlements are covered under the Fair Entitlements Guarantee (FEG) scheme, unpaid superannuation is not,” he says.
The ATO says there are no thresholds. Each case is considered on merit including factors such as the asset position of the debtor, the size and nature of the debt, the future income of the debtor, the risk to the revenue and the cost of bankruptcy or liquidation and the likely return.
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