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The ATO is adopting a range of targeted strategies as it clamps down on the growth in collectable debt.
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DPNs surge to over 18k as ATO ramps up activity
20 March 2024
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The Tax Office has issued a total of 18,343 director penalty notices (DPNs) to directors since 1 July as it continues its focus on reducing the billions of outstanding tax debt.
The 18,343 DPNs issued relate to 13,454 company liabilities totalling more than $2.5 billion, according to figures provided by the ATO.
Around a quarter or 4,695 were issued in just the first two months of the year and relate to 3,413 company liabilities totalling approximately $655 million.
An ATO spokesperson said the Tax Office is implementing a range of targeted strategies to address the growth in collectable debt.
“This includes a renewed focus on legal recovery actions such as court-imposed liquidation if a debt remains unpaid,” it said.
“The ATO will take action to ensure these businesses do not get an unfair financial advantage and to protect other creditors and employee entitlements.”
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Wind-up actions also on the rise
The ATO noted that while the number of wind-up actions initiated by the ATO has increased recently, it remains just below pre-pandemic levels.
The Tax Office has already filed a total of 724 wind-up applications in the Federal Court this financial year, with 171 of these filed between 1 January and 29 February 2024.
The ATO has wound up a total of 130 entities since 1 July 2023, which represents only 2.5 per cent of all wind-ups, the ATO said.
This is a much smaller proportion compared with the pre-pandemic period when ATO-initiated wind-ups accounted for around 16 per cent of total insolvencies for the 2018–19 financial year.
The regulator noted that that most insolvencies are initiated by either other creditors owed money from a business or the business itself, rather than the ATO.
Speaking in a recent seminar, Worrells Central Coast principal Christopher Darin said he expects wind-up notices will continue to ramp up over the next couple of years and may even start to exceed the pre-pandemic levels.
Wind-up notices are the strictest method used by the ATO to pay their debt and are used as a last resort by the Tax Office, Darin said.
“The wind-up notices during Covid were reduced to basically nothing, we’re now in a process where the ATO has ramped up those wind-up notices,” he said.
Darin said businesses must try and act before the ATO issues these proceedings.
The ATO stressed that businesses cannot use monies held for employee entitlements to manage their day-to-day cash flow.
“Taxes pay for the services and support that everyone in Australia benefits from. Paying taxes in Australia is not optional and our job is to ensure everyone pays the right amount and on time, to the benefit of all Australians,” the ATO said.
“We encourage taxpayers who need help or more time to pay to reach out to the ATO or their tax professional early to discuss their situation.”
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