The lenient approach to debt collection taken by the Tax Office during the Global Financial Crisis has been discarded and replaced with a new hard-line. This follows a blowout in outstanding tax debts from 5% of revenue to 11% ($15 billion) last year. The new approach includes the early instigation of garnishee notices and windup proceedings.
During the 2011 financial year, the Tax Office instigated more than 10% of all windups (numbering over 1000). This is double the figure for 2010.
It is using a new business viability software tool to determine whether a softly-softly approach or firm action is appropriate. It says that it will take firm action where:
- Despite multiple attempts at contact the taxpayer does not work with the Tax Office to resolve the debt;
- Multiple payment arrangements are defaulted;
- Debts are escalating and the Tax Office believes there is insufficient evidence that you will meet your ongoing tax obligations;
- Audit activity has identified deliberate avoidance and payment is not forthcoming; or
- Phoenix activity is suspected.
The new firm action approach could involve the issuance of garnishee notices, initiation of bankruptcy or windup proceedings through summons/statutory demands, pursuing company directors personally for PAYG withholding, issuing warrants for the seizure and sale of property or requiring a security bond to be paid.
Where the debt is greater than $100,000 you will be required to demonstrate that your business is viable before the Tax Office will consider a payment arrangement. Apparently, there are some 375,000 payment arrangements currently in place for tax debts.
Financial Review, 16 September 2011, p5; WTB 1439; Tax Office, Active Compliance minutes, July 2011, Firmer action approach to debt collection (NAT 73708).
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