The Australian Taxation Office (ATO) is the most common creditor which pursues winding up applications against companies often resulting companies being placed in liquidation.

The ATO can file a winding up application against a company if it has issued the company with a statutory demand (claiming unpaid tax debts owed) and the company has not paid the amount claimed or negotiated a payment arrangement within 21 days of service of the statutory demand.

The ATO will ‘serve’ a statutory demand on a company by posting the demand to the company’s registered office.

Effects of Liquidation

If a company is placed in liquidation an independent person (the Liquidator) is appointed to wind up the company’s affairs in a orderly manner. The Liquidator will:

  • Sell or realise a company’s assets;
  • Carry out investigations regarding the company, including investigating whether any recovery claims are available, such as claims for insolvent trading;
  • Pursue any commercially viable recovery actions;
  • Report to creditors; and
  • Distribute any surplus funds available, after payment of costs, among creditors.

Further information regarding Liquidation and Deeds of Company Agreements (which are an alternative to bankruptcy) is contained here.

Avoiding Liquidation

It is best for company directors to be proactive in their dealings with the ATO. This will often mean contacting the ATO or engaging a third party to contact the ATO to negotiate a payment arrangement if the company has fallen behind in required tax payments. If there is no communication with the ATO, the ATO will take recovery action including taking steps to place a company in liquidation.

However, even if the ATO has taken recovery action, there are still options available to the company rather than merely letting ATO appoint a Liquidator. We have negotiated a number of payment arrangements on behalf of a companies even after the ATO has taken steps to place them in liquidation. The negotiation of a payment arrangement is more difficult in these circumstances but it is not impossible.

Here are some of the arrangements we have helped put in place:

  • A large transport company owed over half a million dollars dollars to the ATO and had defaulted on eight prior payment arrangements. The ATO was taking steps to put the company in liquidation. We reviewed the company’s circumstances with its directors and accountant and advised that if the ATO placed the company in liquidation this would result in the directors going bankrupt as they had guaranteed debts owed to a number of financiers and other creditors. The directors engaged us to put another proposal for a payment arrangement to the ATO, arranging to pay the company’s debt over two years, providing the ATO wrote off the interest and penalties it had charged. After further negotiations with the ATO, the payment arrangement was accepted and the company avoided liquidation.
  • The director of a company was referred to us by his accountant regarding a retail business the company traded. The company owed several hundred thousand dollars to the ATO and the ATO had issued the company with a statutory demand and refused a payment arrangement request  by the company’s accountant to pay its outstanding debt by monthly instalments. We put a similar proposal to the ATO as well as providing the ATO with details of the steps the company had taken to improve its profitability and notifying the ATO that if the company was placed in liquidation they would receive little or nothing. The ATO agreed to the payment arrangement, including agreeing to withdraw the statutory demand it had issued and write off some of the interest it had charged.

If you have a tax debt , you should urgently obtain professional advice and assistance.  This will help you avoid ATO recovery action.

We can assist you deal with your tax debt problems.  So, please call us for an initial no obligation free consultation.

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We can help.  So call us today.

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Tax Debt Solved
GPO Box 691
Brisbane Qld 4001


Fax:  07 3221 8885
Phone: 07 3221 0055

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