ATO wind-ups: elevated recoveries continuing

ATO wind-up activity persists
at record levels.
Chart courtesy Insolvency Notices

IS 400 wind-up applications per month the tax office's new normal? It's looking that way after the numbers for July, collated by Insolvency Notices, were published yesterday.

As the attached chart indicates, wind-up applications filed by the Australian Taxation Office (ATO) came in at around 400 in July, lower than the previous two months but still well above the long term monthly average of 92. Not that this should surprise anybody given the crackdown was flagged by the tax commissioner, Chris Jordan back in May, when a record 556 wind-up applications were lodged.

"While the majority of taxpayers voluntarily pay their taxes on time or soon after, collecting outstanding taxes is an ongoing challenge for us. Despite our increased efforts, the amount of debt we have to collect has continued to rise in recent years," Jordan said in a speech to the Tax Institute on May 19, 2015.

"We will be taking legal action earlier when warranted, initiating bankruptcy and wind-up action where there is evidence that a taxpayer is insolvent, and looking to use other statutory powers where businesses have failed to pay employee superannuation entitlements or pay amounts held in trust," he said.

Jordan's comments were backed up by deputy-commissioner Cheryl-Lea Field, who said that about half of the companies subjected to an ATO-initiated wind-up notice would proceed to liquidation. And each month since has confirmed that tax debt recovery activity is persisting at historically elevated levels.

After the surge in wind-ups lodged in May - which coincided with a supposedly pro-SME Federal budget - the June number dipped to around 450. But when added to July's numbers they reveal that the ATO has initiated around 1,400 proceedings against SMEs in three months. By comparison it lodged 1,333 winding up applications for the entire year in 2013/14. August meanwhile is on track to record another 400-plus figure.

Given SMEs account for around 60 per cent of the more than $20 billion in collectable tax debt, it might take the ATO some time to make a dent in the arrears, even at 400 per month. That said, a Federal election is due no later than January, 2017, so this more vigorous and comminatory ATO may well assume an altogether gentler demeanour over the next 17 months. 400 per month may in time appear an aberration. Only the opinion polls know.

Chart courtesy Insolvency Notices

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EXCLUSIVE: Taxman's May wind-up blitz a record

THE Australian Taxation Office (ATO) issued more wind-up notices in the month of May than in any given month since July 2012, figures obtained exclusively by Sydney Insolvency News (SiN) show.

The ATO numbers - collated from company wind up activity initiated by the offices of state revenue, workers compensation insurers, ASIC, the ATO and non-government sources - show the ATO filed 556 applications to wind-up non-compliant companies last month. From all sources, the number of wind-ups filed in May reached 722, also a record for the period.

                                                     Courtesy Insolvency Notices

According to Insolvency Notices, produced by Jamieson Louttit & Associates, the next busiest month was August 2013, when the ATO issued 361 notices out of a total of 624.

"If you look at the ATO's annual reports and work out the averages, the number of wind-ups the ATO has filed in May 2015 represents more than half the annual average," Louttit said.

The ATO's annual report for the year to June 30, 2014 shows that since 2009/2010 the taxman has initiated wind-up action an average of 1,103 times per annum. That indicates a monthly average of 92 wind-up applications.

"If you look at the red line on the graph, there's been a significant uptrend by the government to push insolvencies," Louttit said.

"There's a positive in this in that if they are cleaning the system out of people who aren't paying their taxes then it gives everyone the ability to do business with someone who is compliant with the laws."

In March 2015, ATO commissioner Chris Jordan flagged the ATO was taking a tougher stance against non-payers. And Louttit said wind-ups by the ATO and other statutory agencies this month could equal May's record number.

"If you look at the statistics for June, the applications to courts already banked up suggest it's probably going to be the same amount," he said. "It's being increased significantly and it's the SMEs being hit."

Louttit said applying to wind-up non-compliant companies generally results in half of those companies being placed into liquidation while the other half finally pay their outstanding bills.

The ATO has begun working harder to recover billions of dollars in taxes SMEs have failed to pay after conciliatory strategies to debt recovery saw tax debt grow, both in terms of total amount owing and the length of time the debt had been outstanding. See: EXCLUSIVE: ATO in debt assault on SMEs

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