The Australian Taxation Office (ATO) tax receivables increased by $40 billion from 2018 to 2023, forcing a shift in their approach to collecting tax debts following the pandemic. These are several ways we are seeing this shift.

1. Interest Charges and Payment Plans

Many businesses exploited ATO payment plans and delayed payments to manage cashflow. The ATO is now enforcing stricter policies to accept payment plans and rejecting requests to remit interest charges. Businesses must now be more proactive in their cashflow management strategies such as preparing budgets or cashflow forecasts, obtaining finance (where applicable) or restructuring options.

2. Director Penalty Notices (DPNs)

The ATO issued 26,702 director penalty notices worth $4.4 billion in the 2024 financial year. DPNs arise from unpaid Pay As You Go (PAYG) withholding, Goods and Services Tax (GST) and Superannuation Guarantee Charge (SGC), and can convert corporate debt into personal debt. If you receive a DPN, it’s important to act fast as you only have 21 days (from the date the ATO posted it).

Directors can avoid personal liability for these debts if they:

1. Cause the debts to be repaid, or
2. If provided as an option within the DPN, appoint:
a. An administrator, or
b. A small business restructuring (SBR) practitioner (see below), or
c. A liquidator.

Not all DPNs provide the second option. It is important to seek assistance immediately on receipt.

3. Small Business Restructuring

While heavy-handed in other areas, the ATO are considering SBR plan proposals.

The SBR regime allows business owners to retain control of their business while under restructuring. An Australian Securities and Investments Commission (ASIC) review of the SBR regime indicated dividend rates in restructuring plans are 30c/$ or less in over 90% of cases.

There are only a few criteria you must meet to be eligible for the SBR regime, the main criteria being:

1. Liabilities less than $1 million (excluding employee entitlements).
2. Employee entitlements are paid (excluding those not due, for example annual leave etc).
3. Taxation lodgements are up to date (not necessarily paid).

Contact Pilot

If you require assistance with cashflow management, advice on a DPN or would like to know more about your restructuring options, including if your business is eligible for SBR, contact Cameron Woodcroft, Brad Hellen or your Pilot advisor on (07) 3023 1300.