The Australian Taxation Office (“ATO”) is by far the most common creditor to pursue winding applications against companies, with it having been responsible for pursuing over 1,500 of such applications in the 2015 financial year. The ATO is generally only able to file a winding up application against a company if it has issued the company with a statutory demand and the company has failed to pay the amount of the demand, or negotiate a payment arrangement, within 21 days of service.
A large number of the companies which the ATO commences a winding up application against are ultimately placed in liquidation by the Court.
Avoiding ATO Liquidation
It is best for company directors to be proactive in their dealings with the ATO and for example, negotiate a payment arrangement with the ATO to pay a company’s tax debts prior to a company receiving a statutory demand or a winding up application being filed. However, even if the ATO does issue a statutory demand to a company or file a winding up application there are still options available to the company rather than merely letting the ATO put it into liquidation.
We have had success on a number of occasions in negotiating a payment arrangement on behalf of a company with the ATO, even after the ATO has issued a statutory demand or filed a winding up application. The negotiation of a payment arrangement is more difficult after a winding up application has been filed and generally the ATO will require a significant amount of its debt paid up front and/or some form of guarantee from the company’s directors, including possibly the directors providing security to the ATO over assets which they own.
A company which receives a winding up application cannot be wound up voluntarily by its shareholders. However, we have had success in acting as Voluntary Administrators of companies which have received ATO winding up applications (or who have just received a statutory demand) which has allowed the companies to put forward proposals for Deeds of Company Arrangement in order to compromise debts owed to creditors including debts to the ATO.
Advice Regarding ATO Liquidation
Directors of companies with tax problems should seek professional advice prior to the ATO commencing any form of recovery action and advice should be sought urgently if a statutory demand is received from the ATO or if a winding up application is filed.
We specialise in providing such advice and assisting directors of companies with tax problems including those who have received a statutory demand or winding up application from the ATO.