The ATO travel ban explained

What a departure prohibition order is and when it applies

With the ATO aggressively pursuing a record $46 billion in collectable debt, the employment of collection tools such as director penalty notices (DPNs) is increasing exponentially.

But for directors and individuals who remain non-compliant, the consequences can escalate beyond financial liability to a restriction on personal freedom: the departure prohibition order (DPO).

A DPO is a legal travel ban, in this case preventing a debt defaulter from leaving Australia until a tax or child support debt is paid or a suitable arrangement is made. Understanding the triggers and your options is critical in the current enforcement climate.

The Pathway to a Travel Ban

A DPO is not an arbitrary tool. The ATO must have "reasonable grounds" to believe it is desirable to stop an individual owing a debt to the ATO from leaving Australia to ensure payment. Key triggers for action based on the ATO's Practice Statement include ¹:

• Signs of asset flight: Moving funds offshore or securing assets overseas.
• Concealment or dissipation: Hiding assets or transferring them to related parties.
• Indications of intent: Applying for foreign visas or indicating travel without clear need.
• Poor recovery prospects: Lacking sufficient realisable assets in Australia.
• Audit activity: from the ATO or other government agency.
• Financial fraud: for example, charging assets and moving the funds overseas.

¹ For a full list of relevant facts and circumstances the ATO takes into account, refer to 154 of PS LA 2011/18

For company directors, the path is often clear: company debt → DPN (personal liability) → perceived flight risk → DPO.

Trap 1: The "silent" ban

A critical nuance is that a DPO is effective from the moment it's issued, not when a debtor receives it. The ATO must serve notice, but delays or out-of-date contact details can mean that the ban is only discovered at the airport gate.

Tip: If you have significant debts, proactively contact the ATO or Services Australia to confirm your travel status before booking flights. Ensure your contact details are current with ASIC and the ATO.

Trap 2: The myth of easy permission

Temporary travel is possible via a departure authorisation certificate (DAC), but it's not a simple permit. The ATO will only grant one if:

1. You convincingly demonstrate you will return, and payment will be secured; or
2. You provide substantial security (e.g., a cash bond); or
3. You meet strict humanitarian or national interest grounds.

Tip: A DAC application is a formal, evidence-based process. Seek professional advice to prepare a submission that directly addresses the ATO's stringent criteria.

Resolving a DPO: act strategically and fast

1. Address the root cause: Full debt repayment secures the revocation of the notice. If full payment is not possible, immediately negotiate a formal, sustainable payment plan with the ATO.
2. Consider legal review: If the debt or the "reasonable grounds" for the DPO are disputed, formal review or judicial challenge may be an option - this is a complex pathway requiring expert guidance.
3. Seek holistic advice: A DPO signals a severe debt crisis. Solutions may involve financial restructuring (e.g., personal insolvency agreement), formal payment arrangements, and/or other personal insolvency advice (e.g., bankruptcy).

Key takeaway

The DPO is the ATO's ultimate enforcement tool, turning financial non-compliance into a tangible personal restriction. In today's environment, proactive engagement with the ATO at the first sign of trouble is not just advisable but essential to safeguard the ability to travel and personal finances.

Worrells can help

If you are facing ATO debt, a DPN, or concerns about a DPO, speak with a Worrells principal. We provide strategic, practical advice to navigate personal financial challenges.

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.