Tax office is seeking to recoup billions of dollars it allowed businesses to keep during pandemic
As businesses slowly recover from the financial consequences that COVID-19 brought, legal experts have reminded employers to comply with the Australian Tax Office’s (ATO) rules.
Learn about what employers need to remember about their obligations in different situations, as illustrated by legal experts.
The reminder came after the ATO announced that it would seek back the billions of dollars that it allowed businesses to keep during the lockdowns, factoring in the leniency that it allowed when employers were able to defer payments of their Business Activity Statements due to the pandemic’s circumstances.
In a media release, the Law Society of South Australia enumerated some situations that an employer might find itself into and the appropriate response. However, it should be noted that the Law Society clarified that what they published is not legal advice.
In March 2021, the ATO declared that it would resume the enforcement of penalties for certain non-compliant activities. “If you are expecting a long-overdue visit from the ATO, there is no need to panic. The key is not to ignore their calls or correspondence and ensure your contact details are up to date. Communication is the key no matter how reluctant your instincts are to do so,” the Law Society reminded.
“A significant number of businesses used payment plans throughout the pandemic. Available is additional time to lodge overdue returns, negotiate further payment plans and remissions of interest and penalties,” it added.
The group also highlighted that any letters of demand or notices from the ATO should not be ignored since it could include a Director Penalty Notice (DPN).
“If served on a company director by mail to his or her residential address, that director can become personally liable for three types of company tax debts: Pay As You Go (PAYG), Superannuation Guarantee Charge (SGC) liabilities and Goods and services tax (GST). No Court action or demand letter from the ATO’s lawyers is required,” the Law Society said.
“The DPN is designed to change a director’s behaviour who can no longer ignore company tax debts payment requirements. They must lodge Business Activity Statements and Instalment Activity Statements on time even if the company cannot pay the debt created,” it said.
The Law Society’s President, Justin Stewart-Rattray, also highlighted the PAYG tax (withholding). “This is deducted from an employee’s wages, so the ATO’s view is the company has taken the employee’s money. A business must pay this money to the ATO. PAYG Instalments are payments of income tax paid quarterly in the year towards an expected tax obligation accumulated by your business. These instalments could be varied on a Business Activity Statement if a business had been affected by Covid-19,” he said.
On the other hand, if a company fails to meet its superannuation obligations when they are due, it must file a “Superannuation guarantee charge statement” within three months. Failure to comply would expose its directors to personal liability for the company’s Superannuation Guarantee Charge (SGC) liability.
“Failing a response after serving a DPN the ATO may commence proceedings on a director after 21 days. The director will in certain circumstances only have 21 days to pay the debt, or appoint an administrator or liquidator to the company - the latter two very drastic steps,” Stewart-Rattray said.
Meanwhile, the group lastly pointed out to keep track of any creditor’s statutory demand. “This demand is a written request for the payment of debt (such as a tax debt) under section 459E of the Corporations Act 2001 (Cth). The demand also requires the company to pay the debt, negotiate and resolve the debt, so the demand is withdrawn or applied to set the demand aside within 21 days. If it doesn’t succeed, [the business] is legally presumed to be insolvent. The creditor can apply to court seeking the company to be wound up,” he said.
Ultimately, the Law Society warned employers that “failure to take timely action” can have “catastrophic consequences,” noting that any communication received from the ATO “can be serious and should not be ignored.”
