Joyous news that the Small Business and the Taxation Ombudsman’s Office are both to investigate the ATO’s practice of issuing Garnishee notices which can have the effect of clearing out a business’s bank account hours before the payroll is processed leaving workers with nothing, or alternately shutting down the cash inflow to a business because their Debtors have suddenly been side tracked and leaves the business wriggling in its death throws and again putting employees on the street.
Now don’t get me wrong I am not a supporter of running up tax debts, nor using the ATO as a bank but there are far more professional ways of going about business. Firstly, the ATO needs to be far more proactive and get to these businesses much earlier and force them to get help early. If legislation is required to do this then let’s do it!
In a commentary about the impending reviews the intent is to look into the ATO’s systems surrounding the use of garnishees and related tactics. I suspect that that will not take too long, as from where I sit there is no evidence that any system exists at all. I am sick and tired of being asked by clients trying to deal with the ATO: “What will happen next?” The only answer I can give today is “I don’t know, it depends on who you’re dealing with, what office they are in, what mood they are in, any random instructions that may be issued, and a plethora of other unknown issues!”
By way of example I was assisting a client recently to deal with their corporate tax debt. There was a genuine desire to pay but timing due to other circumstances just simply meant that they could not pay now. Easy solution was to provide the ATO with security over an essentially unencumbered piece of real estate and enter into a payment programme with interest being paid. Voila! A perfect solution, something bound to keep everyone happy … well alas no. About three days after the concept had been agreed and it was only the paperwork that needed to be concluded, in the mail comes a Director’s Penalty Notice; totally disregarding all negotiations. I was so tempted to tell the client to act in accord with the ATO’s notice and put the asset-less company into liquidation, and as there was no personal liability on the tax debt the ATO could proudly walk away with nothing!
The other thing that this does not take into account is the inane correspondence with ATO officers as we must try and deal with all sorts of dramas trying to deal with garnishee notices, which in bankruptcy cases includes shares, (theoretically being the income they generate but if you sell them the proceeds are sent to the recorded bank account, i.e. the ATO) and believe it or not superannuation accounts!
I accept steps need to be taken to deal with the criminal element that rapes the government coffers, but for many small businesses the accumulation of debt is a symptom of the many issues facing small business, not the least of which is that there are many people out there who should be employees that have been forcibly driven into their own businesses.
What they need is a transparent fair system that lets the revenue be collected and business and financial difficulties to be dealt with professionally.
Now I’m glad that’s off my chest!