15 Apr 11 On company directors' liability for company income tax debts
MEMBER 61 writes:
"The circus just won't leave town!
Recently we took over a client from another tax agent - can't call him an accountant even though he calls himself one! In addition, he considers himself a business coach as well as a financial planner! You see the circus taking shape don't you?
No BAS or income tax returns lodged for his company since GST started!!! The other tax agent had been receiving the records for all that time, had handed them off to a book keeper (who is now a BAS agent) and nothing had been processed. The client thought his company was up to date and suddenly found out how far behind it was!
Clearly the client should have been more aware but we, nevertheless, went to work and got everything lodged and up to date. As soon as the lodgments were in place and the debt established, the ATO started the attack. Within 9 months, despite numerous efforts to enter into a payment arrangement, the ATO had our client, as the company director, in the Federal Court! Poor legal work by solicitors he engaged ultimately saw this company director sell a rental property and his home to pay the company debt!
Within the last month we had reason to follow up an outstanding debt for an existing client similarly trying to pay off company tax debts comprising BAS, PAYGW and income tax. This debt had been on the books long before the above 'new' client came to us.
His circumstances were similarly desperate. But we were getting somewhere and definitely weren't heading to the Federal Court. Neither company, incidentally, was insolvent, thanks to funds injected by the directors.
As we got close to completing the repayment issues he struck a problem. So we rang the ATO on our client's behalf. The ATO staffer advised that a company director could not be liable for the company debt and the advice we were giving our client in regard to the payment of the debt was wrong! "So in other words, our company director doesn't have to worry because the ATO will write the debt off", was our retort.
And how come we had just been fighting in the Federal Court to have another client, in an identical situation, not be personnally bankrupted by the ATO for similar ATO debts?
Good news though - that ATO staffer gave us his name and office! Thanks for that, Queenslander!!!
By the way we haven't been paid for the work we did for either of those clients yet. But we will be because they each appreciate the fact we treated them both as human beings, not TFNs!!!"