Do You Have A Tax Debt? Why Doing Nothing Is The Worst Thing To Do
14 September 2022
Financial hardship is one of the biggest challenges a business can face, but one thing that is guaranteed to make it more challenging is ignoring it.
Now that Covid relief payments are coming to an end, so is the leniency the Australian Tax Office was once giving when it came to chasing outstanding debts. Debt collecting activities are back in full swing, as the ATO attempts to claw back the $55 billion they are owed. As a result, so too have returned the serious recovery strategies that the ATO has the power to use; namely, garnishee notices, statutory demands and director penalty notices. These recovery strategies can have serious financial consequences and therefore, are the reason why a tax debt should never be ignored.
Increases Personal Liability
When times are tough, instead of seeking professional advice, some business owners or directors resort to taking out multiple loans in order to continue financing their company. However, loans are not easy to attain during financial hardship, so they often require personal guarantees to be secured. Not only does this prolong the underlying issues, it offers no long-term solution and instead imposes high risk on those who have offered personal property as collateral.
In addition to this, directors of companies that are struggling financially and are unable to meet their tax obligations run the risk of receiving a Director Penalty Notice (DPN). A DPN, if left unresolved, can also hold a director personally liable for the company’s unpaid debt; meaning that without professional help, you risk losing your home or even personal bankruptcy.
Risks More Serious Action
If you continue to ignore your tax debt, it is inevitable that the ATO will take more serious action against you; it’s only a matter of time. Recovery tactics like Garnishee notices are serious; they legally order your debtors to pay the outstanding amounts in tax debt directly to the ATO.
Similarly, statutory demands are a legal order and if left unresolved, your business could easily wind up in court facing even more serious consequences.
Limited Recovery Options
Critically, the longer your debts are ignored, the harder it is to save your business.
By ignoring your debt, your problem will simply not be fixed. Not only will the action taken against your business escalate, but you will likely end up accruing further debt, interest and penalty charges; all of which make it harder to save your business.
In addition to this, ignoring your debts and obligations will likely sever relationships with clients, suppliers and banks; resulting in an inability to generate business or attain finance. However, if you take action before it’s too late, your company can likely recover and avoid insolvency altogether.
What You Can Do
By contacting our friendly team at Tax Negotiators, we can assess your financials and implement tailored strategies to help resolve your situation. We are experienced in debt, interest and penalty negotiation and can help arrange realistic payment plans in order to settle your debts and recover your business.
To get started, contact us here today!
- Revive Financial. ‘Company In Financial Difficulty? Why Doing Nothing Is The Worst Thing To Do’, Revive Financial, Online, 2021, https://solutions.revivefinancial.com.au/articles/company-financial-difficulty (Accessed 26 July 2022)
- Australian Tax Office. ‘If You Don’t Pay’, Australian Government, Online, 2022, https://www.ato.gov.au/general/paying-the-ato/if-you-don-t-pay/ (Accessed 26 July 2022)
- Chowanetz, R. ‘Trying To Ignore Your Tax Debt? You Might Want To Try A New Strategy…’, Linkedin, Online, 2016, https://www.linkedin.com/pulse/trying-ignore-your-tax-debt-you-might-want-try-new-ron-chowanetz/?articleId=6198702114831609856 (Accessed 26 July 2022)