Company Liquidation Taxation

What happens if my Company has an outstanding tax debt?

Company Liquidation is an option but before pursuing that, the process of debt collection used by the Australian Taxation Office will usually involve;

  1. Issuing reminder letters that state outstanding lodgements or debts exist.
  2. Issuing more serious reminder letters indicating possible penalties and interest charges that may apply to outstanding returns or non-payment of the debt.
  3. Direct contact by email or telephone by an ATO officer or its engaged debt collectors seeking the reasons for, or rectification of the non-lodgement/non-payment.
  4. Payment arrangements may be considered by the ATO but this often requires a Company to provide reports on the financial circumstances and position to ensure any instalment agreement can be fulfilled.
  5. Garnishee Notices can be issued if the ATO is not satisfied by a Company’s explanation or approach to dealing with the issues, or if an repayment agreement fails. The Garnishee can be served upon a Company’s bank or other persons, including debtors, who hold money on your behalf that will compel them to pay your money to the ATO without your input and outside of your control.
  6. Directors can be held personally liable for a Company’s debt – specifically the outstanding PAYG and Super Guarantee Charge debts. The ATO does this by serving a Director Penalty Notice that will impact a director’s personal assets and may result in personal bankruptcy.
  7. A Statutory Demand may be issued in relation to the outstanding debt. If the debt remains unpaid more than 21 days after the issue of the Demand the Company is deemed to be insolvent and the ATO can then apply to wind up your Company.
  8. Winding Up Application. Once a winding up application is before the Court, a Director can no longer choose a liquidator. The Court will appoint a Liquidator from the ATO’s panel of Liquidators.

While a Company may be wound up, the main issue of concern for any director must be in relation to Point 6 – Personal Liability for Directors for certain Company’s Tax Debts. In this regard, we strongly recommend you read all about Director Penalty Notices on our website.

ALTERNATIVELY call The Insolvency Experts anytime on 1300 767 525 to discuss your specific circumstances.

In calling us, you will be speaking directly with an experienced, licensed and Registered Insolvency Expert who will explain all your options and offer solutions about what can be done in the circumstances.

The Insolvency Experts – Everything you need to know – No Cost or Obligation – 24 Hours.

In the Media Taxation

Single Touch Payroll Program Lead at Australian Taxation Office

Source: John Shepherd via LinkedIn:

Single Touch Payroll is a game changer for tax and super reporting and the broader economy. It is an exciting digital initiative as it ultimately unlocks real time salary and wage information for all employees in Australia.

For now, it means employers will report payments such as salaries and wages, pay as you go (PAYG) withholding and super information to the ATO directly from their payroll solution at the same time they pay their employees.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018. The first year will be a transition, we are keen to help people make this change and accept that there needs to be a bedding in period while everyone gets used to this new process.

The Australian Government has also announced it intends to expand Single Touch Payroll to include smaller employers with 19 or less employees from 1 July 2019, subject to legislation being passed in parliament.

What will I need to do differently under STP?

Single Touch Payroll is a new way of reporting payroll information to the ATO. As you pay your employees through your own payroll process, you will be sending us their tax and super information at the same time.

This will align your reporting obligations to your usual pay cycle. In other words, you’ll be interacting with the ATO at the point where you pay your employees. This will typically be through your accounting or payroll software and the majority of software developers are already building updates into their payroll products to deliver Single Touch Payroll reporting.

When the ATO receives the payroll information, they’ll match that to your records, as well as your employees’ records. You won’t need to provide your employees with a payment summary if you have reported their information through Single Touch Payroll. The ATO will provide that to your employees through myGov or through their pre-filled income tax returns.

What’s next?

We’re working closely with our industry partners – including software providers and tax practitioners – to make sure the move to Single Touch Payroll reporting is a smooth one for everyone.

In the next month we’re also writing to employers with 20 or more employees to let them know about their reporting obligations from 1 July 2018 so they can start planning for Single Touch Payroll.

If you’d like more information you can visit


The ATO Thinks It’s Going Soft

The ATO has issued a consultation paper in which it is proposing changes to penalties for small business and individuals.

In an on-going effort to encourage people to be willing participants in the tax system, the ATO is looking to soften its approach to the application of penalties for situations where there has been a failure to take reasonable care or a failure to lodge various returns on time.

While the ATO describes this as a “softening” in their approach, it is limited to one chance only for the first error and late lodgment. The ATO says that if the community supports the proposed changes, it will have the following rules

  • It will be available to small business with less that $2 million turnover, and to individuals with eligble “clients” being informed of the one time opportunity
  • It will not be available to clients who have a history of recklessness or dishonest behaviour or who do not engage with the ATO during audits or reviews
  • The ATO will indicate that normally a penalty would apply, but not on this occassion
  • The ATO will explain to the client how the error occurred and how they are to deal with the situation in the future to get it right
  • After a three to four year period, the one chance opportunity would reset
  • If the client does not lodge on time after the one time opportunity, fines and penalties will apply

If you want to read the proposal paper, click here

If you need help or assistance with your tax debt, call The Insolvency Experts 24 hours a day on 1300 767 525 for genuine advice, provided free of charge, and without obligation.



This article is not to be construed as legal advice but is presented for information and research purposes only. No guarantee implied or expressed is given in respect of the information provided and accordingly no responsibility is taken by The Insolvency Experts or any member of the company for any loss resulting from any error or omission contained within this article.


How to Negotiate with the ATO without Losing your Shirt

Small businesses account for more than 60% of the total debt owing to the ATO. So if you’ve got a tax debt, you are definitely not alone.

But don’t make the mistake of ignoring a tax debt. It is not going to go away on its own. In fact there is no time limitation for the collection of tax so you must do something to deal with the issue as if you don’t, it is very likely the ATO will exercise its extreme powers and this could lead to company liquidation, bankruptcy and the loss of your personal assets.

This article will help you consider how to approach the ATO and how to best plead your case for an accommodation or compromise of your debt.

The ATO has Power and very Deep Pockets.

If you have a tax debt, you can’t afford to ignore it. The ATO has a number of significant powers and aggressive recovery measures that they will use against taxpayers who don’t or refuse to pay tax.

One possibility is for the ATO to raise a tax assessment, and immediately issue a garnishee.

A garnishee is a tool that directs a bank to withdraw funds from the taxpayers’ account and remit them to the ATO. A garnishee can also be used to direct a debtor to pay money to the ATO rather than you!

Personal Liability for Company Tax Debts

The tax department can also hold a director of personally liable for unpaid company debts – specifically unpaid PAYG and superannuation. They do this by issuing a Director Penalty Notice.

Normally, a director is not responsible for company debts unless a personal guarantee has been granted. However, where BAS returns are not made for more than 3 months past the due date for lodgement, a director becomes immediately personally liable for the unpaid & unreported PAYG and superannuation.

ATO Attitude to Recoveries

The ATO routinely pursues individuals into bankruptcy and companies into liquidation for outstanding tax debts.

In fact, historically, the ATO has been responsible for the most number of forced insolvency cases in Australia – so ignoring a tax debt is not an option.


During the Global Financial Crisis, the ATO assisted taxpayers by entering into payment arrangements over 2 years or more without any real documentation in support. In this way, the government carried many companies through the worst of the crisis.

Subsequently from about 2010 onwards, as things improved, the ATO would allow instalment agreements over a 12 month period, and sometimes a little longer, if the taxpayer could demonstrate by way of documentation, that the business could sustain such an arrangement as well as maintain its current tax obligations.

The rules for ATO compromises are contained in the Public Governance, Performance & Accountability Act 2013 and Law Administration Practice Statements.

These statements lay out the basic rationale for how the law and the discretionary powers to compromise are to be exercised. 

Essentially, the ATO has the power to enter into an agreement if it is financially prudent to do so and if it enables the efficient collection of tax liabilities from those obliged to pay them.

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A taxpayer wishing to propose a compromise arrangement must fulfil the minimum requirements that follow:

  • The debt must not be in dispute.
  • The proposal must be in writing and supported by appropriate material that would explain how the compromise would be fulfilled.
  • The compromise must offer all the taxpayers net assets (with limited exceptions)
  • The Commissioner expects to be treated the same as other creditors. Proposals that prefer or prejudice the ATO will not be accepted

If the ATO is able to conclude a compromise is in the interests of good management or administrative common sense, and that the agreement leads to the most efficient way to collect taxation liabilities, it will be likely to reach a compromise.

What will swing the balance in favour or against a Compromise?

The ATO will exercise its discretion to allow or reject a compromise proposal based on taxpayer behaviour. In particular;

  1. The ATO will favour taxpayers who have acted early and not allowed a debt to become larger by ignoring it.
  2. The ATO prefers taxpayers who take the initiative. When there is a problem, do not hide or pretend the issue will resolve itself. It rarely does.
  3. The ATO will take into account a taxpayers’ payment and lodgement compliance history. If there has been an ongoing issue regarding non-lodgement, failure to pay regularly or honour commitments, it is unlikely an agreement will be made.
  4. The compromise must deliver a better return to the Commonwealth that would be obtained by any available recovery processes. There must be a positive advantage of substance to revenue for accepting a compromise.

In making compromise agreements, the ATO will be concerned not to be seen to condone anything that is detrimental to revenue generally or to be seen to be encouraging the proliferation of these types of agreements as being the normal way of dealing with tax debts.

No matter how difficult the financial situation, company insolvency or personal bankruptcy is not the only option. Liquidation is but one of a range of alternatives that director must consider for their own benefit before they make any formal appointment.

If you are facing financial difficulties, take control, and learn about the alternatives available to you. As always, call The Insolvency Experts for help on 1300 767 525.


This paper is not to be construed as legal advice but is presented for information and research purposes only. No guarantee implied or expressed is given in respect of the information provided and accordingly no responsibility is taken by The Insolvency Experts or any member of the company for any loss resulting from any error or omission contained within this article.