The Australian Taxation Office (ATO) does not have the authority to directly make a person bankrupt.
However, the ATO can initiate bankruptcy proceedings against a taxpayer if they have outstanding tax debts that have not been paid or resolved.
The process typically involves:
- Firstly; the ATO commencing legal proceedings against an individual taxpayer for an outstanding tax debt. This will only be done after the ATO has made numerous demands for payment and if a payment arrangement has not been entered into;
- Secondly; the ATO obtaining a Judgment in the legal proceedings commnenced;
- Thirdly; once the ATO has obtained a Judgment, the ATO issuing a bankruptcy notice to the taxpayer, which serves as a formal demand for payment of the outstanding debt;
- Fourthly; if the taxpayer fails to comply with the bankruptcy notice, the ATO can then apply to the Federal Circuit Court to obtain a sequestration order, which declares a person bankrupt; and
- Fifthly; if the ATO obtains a sequestration order a person will be made bankrupt by the Court and a bankruptcy Trustee will be appointed.
It is important to note that bankruptcy is a legal process, and it is advisable to seek professional advice from a bankruptcy trustee or a legal professional if you are facing potential bankruptcy proceedings.
So what should you do?
If you have a large personal tax debt which you cannot pay, bankruptcy can be an option. Depending on your circumstances bankruptcy can release you from having to pay the ATO with very limited consequences. But you should get professional advice about your situation before you consider going bankrupt.
Contact us for assistance
If you are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help with a free, no-obligation consultation. So, contact us today.
