As we emerge from the COVID-19 pandemic and head towards an endemic phase, the ATO appears to be awakening from its slumber.
During the pandemic, the ATO effectively ceased all winding up applications, but now as we head to some form of normality the ATO is beginning to recommence formal court action. As has been well publicised, the ATO have recently been rumoured to be issuing upwards of 150 Director Penalty Notices per day, a staggering amount to say the least and now it seems that it is beginning to recommence its collection efforts in the form of formal proceedings against companies with outstanding tax debts.
In August 2022 alone, the ATO issued 17 winding up applications across Australia, which equates to approximately the same amount of applications for the entire 2 year period since COVID commenced. The amount of applications for September 2022 to date appear to exceed that of the previous month. With rising inflation and interest rates it appears that this upward trend in ATO winding up applications may continue into the foreseeable future.
Prior to issuing a winding up application, the ATO must first issue a company with a statutory demand in relation to the unpaid tax debt. Should that company fail to pay the outstanding amount claimed or negotiate an achievable repayment arrangement, the ATO can file a winding up application within 21 days of service of the demand.
Once the ATO has filed a winding application, the options for a company director become somewhat more limited, for example, the option to appoint a creditor's voluntary liquidator is removed. Accordingly, it is essential business owners seek the appropriate expert advice before it is too late.
At BRI Ferrier, we can provide business owners with restructuring solutions through formal processes such as:
- Safe Harbour advisory
- Small Business Restructuring
- Voluntary Administrations
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.