When the ATO calls because your client hasn’t paid their BAS and IAS, what do you do?
When the ATO Calls
I am sure this has happened to you – at least once. You suddenly get a call from a No Caller Id number. It is the ATO. One of your clients hasn’t paid their BAS and IAS for the past six months.
You call your client but no answer. What do you say in your voice message? You need to lead with a solution. But what is the solution?
That is the question to Damien Lehmann of ADLV Law in Sydney.
Here is what we learned but please listen in as Damien explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
When the ATO Calls
You have three possible approaches to lead your client through an unpaid tax debt.
1 – Payment Arrangement
Request that the ATO stops charging further General Interest Charges (GIC) and negotiate payment terms.
2 – Hardship Applications
Usually not worth your time. But maybe there is more room for them now during COVID.
3 – Liquidation
Make sure all STP, BAS, and IAS were lodged on time – otherwise your client faces a DPN.
To liquidate the company with a substantial outstanding tax debt you need an administrator and liquidator and those don’t come cheap. So liquidation is only worth it if the tax debt is high enough (>$100k?).
With liquidation, you always run the risk that the ATO will look for trading while insolvent and hold directors personally liable through a DPN. So stay clear of that or make sure that directors (and shadow directors) hold no assets.
Summary
So there is no silver bullet. Making a payment arrangement and asking the ATO to at least stop the GIC is really all you got. Because hardship applications are not really worth your time. And liquidations are risky if there are still personal assets the ATO could go for.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.