Tax debt lawyers are legal practitioners who practice in tax debt disputes with the Australian Taxation Office (“the ATO”).
This can include responding to director penalty notices, garnishee notices, and negotiating with the ATO to reach a resolution.
Director penalty notices are notices which seek to make a director personally liable for tax debts and must be dealt with quickly and efficiently.
In some cases, director penalty notices can be defended, so tax debt lawyers can advise and assist with defending these notices.
A garnishee notice is a notice issued by the ATO to a third-party of a tax debtor, directing any monies held on behalf of the tax debtor be transferred to them.
Tax debt lawyers can attempt to defend garnishee notices or negotiate with the ATO to withdraw the notice.
Whatever type of tax debt dispute, our tax debt lawyers can offer advice and assistance.
What are ATO Tax Debts?
Tax debts are debts owed by a person or business to the ATO.
Tax debts can include ATO interest & penalty charges, tax, GST, and superannuation liabilities and debts, foreign tax credits, credits and refunds of indirect taxes, and/or franking credits and debits.
It may be that something is not quite right with the assessment, or there is a mistake with any demand made from the ATO. If this is the case, then the onus is on you (the taxpayer) to prove the inconsistency.
Tax debt disputes with the ATO can take a large amount of time and be expensive to defend.
If you have tax debts, then it is very important that you get advice from tax debt lawyers as soon as you receive anything from the ATO.
Time is very much of the essence with tax debts.
What do Tax Debt Lawyers do?
There are a number of things that the ATO can do to enforce the payment of tax debts, including:
- Sending a tax debt letter of demand.
- Issue a director with a director penalty notice.
- Issue the tax debtor with a garnishee notices.
- Commence legal proceedings to recover the tax debt.
- Send a company a statutory demand for a tax debt.
- Commencing wind up / liquidation proceedings.
- Commencing bankruptcy proceedings.
If you have been served with any of the above, a tax debt lawyer can provide you with timely advice and assistance in relation to your risk, and how best to move forward.
Director Penalty Notice
The ATO can issue a director of a company with a director penalty notice if the taxpayer company fails to meet their obligation in relation to PAYG, Superannuation Guarantee Charge, and GST.
There are two types of director penalty notices – a lockdown notice and a traditional notice.
A traditional director penalty notice is a notice giving the director of the company 21 days to:
- Pay the tax debt (or enter into an agreement to pay).
- Put the company into administration or liquidation.
- Engage a small business restructuring practitioner.
If any of these three things are not done within the requisite time, then the director becomes personally liable for the tax debts of the company.
A lockdown director penalty notice is given when a company’s tax liabilities are not paid and have not been reported to the ATO within three (3) months of the due date.
A lockdown director penalty notice makes the director instantly liable for the tax debts of the company tax debtor.
It is very important to contact a tax debt lawyer or liquidator as soon as possible after receiving a director penalty notice.
The ATO can also issue a garnishee notice to any third-party who is holding money for the tax debtor and requires that third-party to pay money due to the tax debtor directly to the ATO.
Garnishee notices can damage your business reputation and are embarrassing as they drag third parties into your finances and may cause significant cashflow issues.
For individual tax debtors, a garnishee notice may be issued to:
- Your bank, building society, or financial institution.
- People who may owe the tax debtor money.
- The tax debtor’s head contractor or employer.
For business tax debtors, a garnishee notice may be issued to:
- The tax debtor’s business suppliers.
- The tax debtor’s business trade debtors.
- The tax debtor’s business bank or financial institution.
It is very important to contact a tax debt lawyer or liquidator as soon as possible after receiving notification of a garnishee notice.
Statutory Demands to Recover Tax Debts
If the tax debtor is a company, then the tax office can serve a creditor’s statutory demand.
The ATO does not need a money judgment to serve a statutory demand on a tax debtor company, because a statutory demand can be served with a judgment or an affidavit.
Once served with the statutory demand, the taxpayer has 21 days to:
- Secure or compound for the tax debt to the reasonable satisfaction of the ATO.
- Pay the amount of the tax debt claimed by the ATO.
- Request that the ATO withdraws the statutory demand; or
- Make a Court application setting aside the statutory demand.
If the tax debtor does not do any of the above, then the tat office may use the presumption of insolvency and make a winding up application.
ATO tax debts are difficult to defend because of the ‘conclusive evidence rule’ which states that if the ATO says you owe tax, then you owe that amount in tax, and it is up to you to prove you do not.
This can be difficult when trying to set aside a statutory demand.
It is very important to contact a tax debt lawyer as soon as possible after being served with the statutory demand, because 21 days means strictly 21 days.
Tax Debt Legal Proceedings
It can be difficult to defend tax debt legal proceedings because the rule that a taxation assessment is conclusive evidence:
- That the assessment was properly made; and
- Of the amount of tax, penalties, and interest.
Even if there is a dispute about the tax, the tax debtor may have to pay the entire amount until the tax debt dispute is resolved.
Even if you file a notice of objection, you are still required to pay the entire amount.
Because of this, it can be very difficult to defend tax debt legal proceedings, which is why it is very important to contact tax debt lawyers as soon as possible after being served with the claim and statement of claim.
If the ATO get Judgment
If the tax debtor loses at trial, then they are in risk of:
- Being ordered to pay the legal costs of the ATO; and
- The tax debtor will get a judgment entered against them.
Once the Court issue a judgment, the ATO could enforce that judgment by:
- Enforcement warrants; and/or
- Issuing a bankruptcy notice and start bankruptcy proceedings; and/or
- Issue a statutory demand and start winding up / liquidation proceedings.
It is very important that you do not leave things until the last minute, and speak to tax debt lawyers today.
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