We are currently getting flooded with correspondence from the ATO that is being sent to our business clients relating to outstanding lodgements for tax returns and Business Activity Statements. The ATO is also quick to follow up clients with outstanding tax liabilities or clients who have breached their payment plans.
From our perspective, this increased ATO scrutiny is an unfortunate response to the increased Federal funding it has received, the ability for to access more information on a timelier basis and the pressure to collect outstanding taxes to help the Federal coffers. We are also seeing a lot of businesses struggling as inflation hits discretionary spending which has impacted sales as well as cash flow drying up as businesses struggle to get debtors to pay on time and in full. So a common reaction for many clients is to stop lodging and communicating with the ATO and focus on other areas to keep the business going.
The bad news is this is absolutely the wrong approach and could lead to serious problems. It is crucial even if payment cannot be made, that businesses lodge all their tax commitments on time. Failure to do so may result in these tax liabilities being imposed on the individual owners which puts their personal assets such as their home at risk and also increases the risk of the individual owner going into personal bankruptcy.
Contrary to popular opinion, the ATO is very reasonable with businesses and do try and assist where they can. It is crucial to keep communicating with them so that they don’t keep escalating a tax debt issue further. The ultimate escalation of a tax debt is the issuing of director penalty notices and it cannot be stressed enough that if a business owner receives one of these they need to act fast and talk to their advisors. The time is ticking and there is only 21 days to reach a resolution.
The importance of a good accountant and tax agent during these difficult times has never been more important. They can help minimise these risks and help develop and implement strategies to improve your cash flow and profitability. As always, Elysium is here to help so if you have any queries or need assistance, please do not hesitate to contact us.