Obviously the truth tends to be the best path to take, but this is especially true when it comes to the Australian Taxation Office.
In a recent article in the Australian Financial Review a spokesperson from the ATO denied they were “‘cracking down small business’ as some claimed, but was taking a balanced, fair and supportive approach to ensure that all small businesses meet their tax obligations.”
In fact the September quarterly figures for corporate insolvencies statistics released by ASIC suggests the “percentage of companies entering EXAD (some form of external administration) for the quarter, relative to new incorporations, remains around 4% compared to the long-term trend of around 6%”.
There are lower comparative levels of insolvency however, court liquidations (up 53.5%) and voluntary administrations appointments (up 11.6%) rose nationally compared to the June quarter whilst creditors’ voluntary liquidations and receiverships fell overall (down 16.2% and 5.5% respectively).
Court liquidation appointments rose in all states and territories except the Northern Territory. Material increases in New South Wales (up 47.8%), Victoria (up 63%), Queensland (up 40.8%) and Western Australia (up 72%) drove an overall rise in Court liquidation appointments of 53.5%.
What we have found is that the ATO is seemingly fed up with being fibbed to and they’re actually just being tough on business and individuals with poor compliance history.
In fact the ATO are ‘cracking down small business with poor compliance’. The ATO’s position appears to be that liquidation is the ultimate sanction for a corporate debtor that does not pay, or make acceptable arrangements to pay, a debt.
The ATO will not negotiate with you if you have made promises numerous times previously and have not delivered.
It seems that they have read The Boy Who Cried Wolf and businesses who have lost any goodwill with the ATO will find it almost impossible to negotiate again.
What this actually does is create a fairer playing field for all businesses. Because how is it a fair marketplace if some businesses are complying and paying their taxes and others are not?
The organisations that are not paying their taxes are not viable should not be in business.
The top tips I have for businesses are:
- Make your ATO lodgments are lodged on time, every time ‚Äì even if you can’t pay the tax. At least you’re showing the ATO you’re trying to be a good tax payer and comply with your obligations.
- Don’t propose a repayment arrangement that your business can’t make. You lose credibility with the ATO to be able to honor your proposals.
- Speak with your accountant regularly if you start to find things aren’t going well in your business, so you can be proactive and make the changes to avoid the risk of becoming insolvent.
- If you don’t have a budget or cashflow, how do you actually know if you have a viable business? Find an accountant that will help you with this if it’s one of your weaknesses.
- And obviously – don’t fib to the ATO!