In October 2014, Tria Partners, a research house commissioned by Cbus, AustralianSuper and REST, released a report indicating non-payment of superannuation by employers affects around 650,000 Australian employees, leaving them collectively out of pocket by almost $2.5 billion per year.
CBUS chief executive David Atkin has called on the government to target non-compliance, enforcement and education as a matter of urgency to protect retirement savings for employees.
This industry pressure, combined with statements made by the Tax Commissioner Chris Jordan earlier in the year advising the ATO would be taking legal action earlier to recover debts in the future, indicate that an increase in ATO driven bankruptcies and liquidations could be on the cards.
In March 2015, Mr Jordan noted the value of total outstanding debt to the ATO as at 30 June 2014 was almost $19.5 billion (an increase of 10 percent on the year before) despite the ATO’s debt collection activity increasing by 4.8 percent.
Mr Jordan highlighted the point that your average creditor takes enforcement action against individuals and companies when their debts reach approximately $35,000 and $93,000 respectively, however the ATO has historically waited for individuals and companies debts to reach the $300,000 and $340,000 mark before initiating bankruptcy or liquidation proceedings.
ATO Compliance – Increased Recovery Actions
When the Director’s Penalty Regime was strengthened in June 2012 to mean a director can be held personally liable for a company’s unpaid PAYG and Superannuation if the company failed to lodge business activity statements, instalment activity statements or superannuation quarterly returns within three months of their due date, the ATO indicated this initiative was to increase tax payer compliance and to urge tax payers to address their taxation liabilities sooner rather than later.
Our recent experience with the ATO has confirmed their focus on communication and compliance.
Proposals to settle tax debts for a value less than the debt owed, but higher than that available in a bankruptcy scenario for individual taxpayers have been rejected on the basis of the tax payer’s history of non-compliant behaviour.
Winding up applications have been instituted promptly following the expiration of a statutory demand in instances where the company tax payer has defaulted on a number of payment plans or has an extensive list of activity statements outstanding.
If you have any clients who may require advice in relation to cashflow difficulties, or notices received from the ATO regarding outstanding taxation liabilities, please do not hesitate to contact SV Partners on 1800 246 801.