Do you have legacy debt and are starting to feel like perhaps you “got away with it?” Think again, because the ATO is starting to chase down the pre-pandemic debts that it is owed, and court is going to be a powerful tool for its debt recovery efforts. 

It should go without saying that a court date with the ATO is a level of stress that you absolutely do not need, and so if you do have some long-term debts, you should contact the team at Emergency Accounting now to work out what the best path forward is for you.

You’re not even covered if you’ve wound up a company that still had ATO debt attached to it. Directors of these former companies are starting to be blindsided as the ATO has the ability to reinstate some companies as it dusts off the old files. For this, the ATO is particularly focused on debts accumulated before COVID, which it was then unable to chase through the courts during COVID restrictions.

Essentially, if your company has been struck off for a non-lodgement of returns over the last several years, the ATO can apply through the Corporations Act and get your business reinstated. That’s when you’ll start getting threatening letters from the ATO for a business that you thought was now history.



You’ll Be Personally Responsible

The ATO has been using Director Penalty Notices (DPN) to hold directors personally liable for company debt. This means that directors can be held accountable for the debts of a company that may have been deregistered by default during the last three years. 

The process works as follows: The ATO appoints a liquidator for the purpose of being able to chase either the company because they know the company had assets before it went into liquidation or got struck off, or the directors if they have assets and the ATO wants to chase them for the debts. 

For example, there was a story recently of a director of a company that was liquidated in 2019 who said that the ATO had issued them with a DPN linked to the superannuation guarantee covering the 2015 and 2016 financial years.

This is not a situation that you want to be in, or debt that you want. It can affect your personal credit rating and become a real legal risk to you personally. If it gets to that point you’ll probably also need a lawyer, but if you have any residual concerns about a business that you have wound up in recent years, you should be preparing now by speaking to specialist accountants, like the team at EPAS, to understand how at risk you are.



What Can You Do?

When it comes to these debts, there is some real complexity around them. Furthermore, your negotiating position with the ATO may be different, given the length of time that the debt has gone unpaid, and that the ATO is resorting to its most powerful strategies to recover the debt.

Or in other words, while in the past the ATO has been somewhat amenable to payment arrangements and reducing debt via a reduction in the level of interest accrued, as it is for many current companies that accumulate tax debt, there are indications that it’s not going to be as flexible in this area.

It’s critical that you get out in front of this, and speak to EPAS about tax debt help before you get the letter from the ATO. We will be able to look into your company’s history and determine what, if any, steps you need to take (or whether it’s likely that the ATO will be in touch with you).The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.