In 1939, Winston Churchill famously described Russia as
“a riddle, wrapped in a mystery, inside an enigma”.
These words can be equally applied to the Australian Tax Office.
Emerging from its COVID era forbearances the ATO has announced that it is to be more focused on recoveries and holding errant taxpayers to account.
Whilst this new policy has undeniably led to an increase in the reported number of Director Penalty Notices (DPN’s) issued and the ATO taking a more active role in Courts, results have been inconsistent.
In some matters Vincent Young has encountered the ATO being very aggressive. The ATO has rejected payment plans, issued DPNs and pursued winding up petitions. There was even a matter where the ATO took the lead in applying to have a Deed of Company Arrangement (DOCA) set aside under section 445D of the Corporations Act after the ATO was outvoted at a second meeting of creditors. In another case the ATO has funded a series of liquidators to pursue a corporate group through a number of liquidations.
On the other hand, we have acted on a number of cases recently where the ATO has given defaulting taxpayers significant leeway and supported DOCAs in matters one would ordinarily expect the ATO to resist. This included one matter where the company in administration had clearly funded the significant growth of its business by drawing on PAYG and GST collections it should have remitted to the ATO. When this poor behaviour was pointed out at a second meeting of creditors, it still didn’t stop the ATO voting in favour of the DOCA notwithstanding that this DOCA would return control of that company back to the very directors who had illegally drawn on this tax money in the first place.
It seems there is no rhyme or reason and certainly no overarching collections policy that is governing how the ATO is conducting itself. A lack of consistency makes it difficult to predict how the ATO is going to respond which in turn makes any restructuring or administration more challenging to execute. The key determining feature appears to be the proclivities of the ATO officer who is internally assigned to manage your case. This can truly be a matter in which “the luck of the draw” prevails.
Obtaining early advice from the right accountant and lawyer in such circumstances is critical.
We are only a call away if you need help deciphering the enigma that is the ATO.
David Greenberg, Partner – Commercial