If you have a significant personal tax debt which you cannot pay (including through a payment arrangement) there are two options:

• Go bankrupt;
• Or put a proposal to your creditors (e.g. the ATO) to settle your debts via a Personal Insolvency Agreement.

This is an example of how we helped a client settle his tax debts via a Personal Insolvency Agreement.

What is a Personal Insolvency Agreement?

A Personal Insolvency Agreement is a procedure under the Bankruptcy Act to settle debts.  It involves appointing a Trustee to assist with putting a proposal to creditors to settle your debts.  The Trustee also carries out investigations into your financial affairs, prepares a report to creditors and holds a meeting of creditors to vote on your proposal.  At the meeting a proposal will be accepted if it is approved by a majority in number of creditors who are owed more than 75% in value of the total amount voting.  This only includes creditors who vote at the meeting and some creditors do not vote.

If you have a large tax debt then generally your proposal will only be accepted if the ATO votes for it.

If the proposal is accepted it is binding on all unsecured creditors and assuming you pay the amount of the “offer” under the proposal you will avoid bankruptcy.

How can this process be used to settle ATO debts

We recently helped someone who had a personal tax debt of over $300,000.  He could not pay the debt but did not want to go bankrupt.  One of the options we put to our client was to propose a Personal Insolvency Agreement and he was able to come up with an amount of $100,000 to pay if the proposal was accepted, with these funds being paid by family.

We were appointed as Trustees and prepared a report to creditors and held a meeting.  The ATO was the major creditor who attended the meeting and they voted FOR acceptance of the proposal.  One of the major reasons for this was there would be no return to the ATO if our client went bankrupt, but under the proposal they would be paid a significant amount.

Our client arranged payment of the funds and the process was quickly finalised and he avoided bankruptcy.  This was a great outcome for him.

Contact us for assistance

If you are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help.  So please contact us for a free, no-obligation consultation.