ATO fire warning to SMEs on BAS compliance

Small businesses that failed to keep up with their BAS obligations found themselves on the wrong side of the ATO with new statistics revealing the Australian Taxation Office (ATO) is the largest source of company wind ups.

Data sourced by Prushka Fast Debt Recovery from court records on insolvency revealed 46 per cent of petitions for winding up of companies issued from November 2016 to June 2017 came from the ATO, with a further 19 per cent from other government sources.

Prushka CEO Roger Mendelson said some businesses see the ATO as a faceless entity and will try to push back on payments to creditors. However, in reality the ATO has far more extensive powers when it comes to collecting money it is owed, and will act quickly and efficiently.

 Mendelson said that wind ups can occur quickly, particularly because there is a process to liquidate companies without judgement on undefended claims over $2000.

“It is critical that businesses maintain their BAS payments or risk facing major penalties. While the ATO will work to help those genuinely making an effort to meet their obligations, they will come down hard on anyone consciously avoiding paying,” he said.

“Many business owners underestimate the cash flow challenges they face and can easily come unstuck. BAS is so important because the payments aren’t simply tax instalments; in most cases they include employee PAYG instalments and withholding tax, as well as GST.

“This means as a business owner, you are really just the custodian of this money for the ATO and are legally obligated to pay it on.”

Gess Rambaldi, Partner – Business Recovery and Insolvency, at Pitcher Partners, says since the GFC, the ATO has improved its debt recovery process and procedures and has become more effective in the process of insolvency appointments, leading to the recovery of debt.

“Since reaching the peak of corporate insolvencies during the GFC, the rate of wind-downs has been relatively stable, however ATO-led insolvencies have increased proportionately,” Rambaldi said.

“The ATO has certainly become more diligent since the surge in insolvency work caused by the GFC, not only increasing its involvement in wind-downs, but also investigating phoenix activity, being more vocal on insolvency issues in the industry, and implementing a range of policies concerning its participation as a model litigant and as an active creditor in insolvency administrations.”

Mendelson says businesses need to be aware of the increased scrutiny and the real risk of wind ups, and ensure they are adequately planning ahead to meet their obligations.

“Ultimately, the ATO is simply enforcing the legal requirements businesses have. If you aren’t meeting these obligations then you will be caught out. And in reality, being unable to pay your BAS not only puts you on the ATO’s radar, it indicates a more serious insolvency issue that needs to be addressed as quickly as possible. These problems can rapidly spiral out of control and lead to the collapse of a business.”

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