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Tax & Insolvency

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What to do when the ATO comes knocking
- ATO information requests
- Freedom of Information (FOI) requests
- ATO interviews – don’t assume they're harmless

Handling grenades
- Director penalty notices
- Creditor statutory demands
- Restructuring

Published in: Law
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Tax & Insolvency

  1. 1. Tax & insolvency Q&A 13 NOV 2018
  2. 2. What to do when the ATO comes knocking TrungVu
  3. 3. ATO audit/review process Informal information and document request • Harmless right? • There’s nothing to hide. • Want to do the right thing… Slide 3
  4. 4. Issues General requests • Financial statements – gaps re: tax returns • Breadth of scope: • Period of review timeframes • Costs of compliance Specific request • ‘Dog with a bone’ – don’t throw the bone! Slide 4
  5. 5. Issues Interviews • Informal • No scope requirement but also no compulsion requirement • Formal (section 353) • Specific scope requirement but compulsion requirement • Generally • Don’t under-estimate – be prepared • Buy more time – avoid “I wish I had done it differently” • ATO interview techniques – police service standards Slide 5
  6. 6. Freedom of Information (FOI) requests • The taxpayer’s sword • Right to access government documents about the taxpayer • The ATO can request information and documents – so can the taxpayer under FOI Slide 6
  7. 7. FOI requests • Costs involved: • First five hours free • Agency must provide estimate first • Search and retrieval – $15/hr • Decision making – $20/hr • Photocopy – 10c per page • Transcript – $4.40 per page • Don’t be overly general about the request e.g. all documents about the taxpayer Slide 7
  8. 8. Audit position to objection Position Paper • ATO will very unlikely change position post issue of position paper – be prepared for another assault Objection • Does not stop debt recovery action • Keep in contact with the ATO! • Consider 50/50 arrangement Slide 8
  9. 9. Audit position to objection Inaction will result in: • Garnishee • Director penalty notices • Statutory demands • Supreme court proceedings Slide 9
  10. 10. Handling grenades Robert Champney
  11. 11. Statutory demand – what next? • Time is of the essence • Company has 21 days from date demand is served to either: • Pay debt • Secure to creditor’s satisfaction, or • Apply to the Court to set aside the demand on the basis there is a genuine dispute or offsetting claim • 21 days starts from when the demand is served on the registered office Slide 11
  12. 12. What you need to do • Do not waste the 21 days. Act promptly in commencing negotiations with the ATO. • A failure to resolve demand within 21 days leads to a presumption of insolvency. • All options need to be explored: • Can the demand be paid? • If not, can a payment plan be implemented? • If not, does the director need to consider taking advantage of the Safe Harbour provisions? • Does an Administrator need to be appointed? • What is the tax liability claimed? What are the personal risks to the director, e.g. are all tax returns up to date and lodged (to avoid a DPN) • What other risk points are there for the Company? E.g. exposure to QBCC license issues if a building company Slide 12
  13. 13. Director penalty notices • Commonly arrives around the same time as a creditors statutory demand • 2 types of DPNs: • 21 day DPN • Lockdown DPN Slide 13
  14. 14. 21 day DPN • Director has 21 days from the date of the DPN (not the date it is received) to: • Cause the company to pay the debt • Put the company into liquidation • Put the company intoVoluntary Administration • Come to a payment arrangement with the ATO • Failing these, the director becomes personally liable. Slide 14
  15. 15. Lockdown DPN (3-month lockdown provision) • Makes directors automatically personally liable if: • PAYG or SGC remains unpaid and unreported 3 months after the due date for lodging a return, and • The director cannot cause their DPN to be remitted (cancelled) by placing the company into liquidation orVA • If the company tax returns are up to date and lodged, the director cannot be liable for a lockdown DPN, and may still utilise the 21 day period under a 21 Day DPN
  16. 16. Restructuring Can be an effective strategy in times of financial difficulty if undertaken properly. • Time can be your best friend or worst enemy • Must be done properly not to fall foul of voidable transaction provisions within the Corporations Act or BankruptcyAct Slide 16
  17. 17. Bad restructuring examples • Transfers of property for love and consideration • Transfers for no consideration or less than market value • Sham separations • Transfers toTrust Slide 17
  18. 18. Questions?
  19. 19. Get in touch TrungVu TrungV@Redchip.com.au 07 3223 6100 RobertChampney RobertC@Redchip.com.au 07 3223 6100 Lucas Hewlett LucasH@Redchip.com.au 07 3223 6100

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