LETTERS FROM THE TAX OFFICE
These letters should sensibly be treated as the commencement of a recovery of unpaid taxes.
- The client ought to be advised to either pay the outstanding tax,
- Enter into a binding agreement to pay the tax,
- Enter into a formal reconstruction arrangement
To avoid dramatic action which may be taken by the ATO.
ATO MAY ISSUE GARNISHEE NOTICES DIRECTED TO THE COMPANY’S DEBTORS
The Commissioner of Taxation is empowered to collect tax debts from third parties, including debtors, who owe money to your client without having to proceed to judgment.
ATO MAY ISSUE GARNISHEE NOTICES DIRECTED TO THE COMPANY’S BANK ACCOUNT
If the tax is not paid and the business’s bank account is the repository of the working capital of the business, then when it is cleaned out by virtue of the garnishee, the business will have precious little working capital and will very likely fail.
LATE PAYMENT OF COMPANY TAX TO THE ATO MAY BECOME A DEBT RECOVERABLE FROM THE DIRECTORS
If your client’s business is conducted by a corporation, and payments are made to the Tax Office shortly prior to liquidation, then those payments may under certain conditions be recoverable by a liquidator as a preference payment, and if the Tax Office is required to repay those monies to the liquidator, under the Corporations Act  directors are required to indemnify the Tax Office for those amounts.
DIRECTORS PENALTY NOTICE
If your client fails to lodge the company’s Business Activity Statements within 3 months of the due date for lodgment the directors will become personally liable for the tax. If your client fails to pay super within 3 months of the due date then the director will become personally liable for Super Guarantee Charge. This liability is imposed automatically and can no longer be discharged (as previously was the case) by winding up the company or appointing an administrator.