Recently, as part of the ATO Enforcement and Recovery Processes, the Australian Tax Commissioner, Mr. Chris Jordon emphasised the importance of paying tax and superannuation to enable the Australian society and economy to continue to thrive. He also promoted the voluntary support of individuals and corporate entities to meet their taxation obligations.
However, in the event taxpayers fail to meet their obligations the Commissioner advised that thresholds at which action would be taken for recovery had been reduced for individuals from $300,000 to $35,000 and for corporations from $340,000 to $93,000.
In an effort to reduce the growing debt levels owed to the ATO, the ATO is speeding up their enforcement and recovery processes. In particular, the ATO will now be more readily using garnishee notices.
A garnishee order has the effect of creating a charge in favour of the ATO in priority to any existing charges granted by the Company. This type of order does not require a registration on the Personal Property and Securities Register (“PPSR”) because it is a statutory charge.
Even when a garnishee notice is issued within the 6 months review period open to liquidators, they cannot be overturned. Liquidators have no rights of recovery from the ATO of funds received as a result of the issuance of a garnishee notice.
It is also important that directors are aware of the automatic personal liability and Director Penalty Notice (“DPN”) under the Income Tax Assessment Act 1936.
The director of a company that fails to meet their PAYG or SGC obligations in full by the due date automatically becomes personally liable for a penalty equal to the unpaid amount. For PAYG the due date is 21 days after the end of the reporting period. Whereas the due date for SGC is the 28th day of the second month after the end of the reporting period.
The ATO still has the power to issue a DPN even where the necessary returns have been lodged but the relevant liabilities have not been paid. However, personal liability is not automatic and can be avoided by making payment arrangements with the ATO or taking certain actions in respect of the Company.
If you require any further information or advice regarding the ATO enforcement and recovery processes, please do not hesitate to contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.