ATO wind-ups near record in September

Chart courtesy Insolvency Notices

THE taxperson's new found enthusiasm for pursuing inveterate non-payers continues to impress. Figures obtained from Insolvency Notices reveal that the Australian Taxation Office (ATO) initiated 568 wind-up applications during September, strengthening expectations that this year's sharp lift in legal action to force companies to liquidate or comply, will endure.

September's number was second only to the record 582 wind-ups filed by the ATO in May and far exceeds the 92 per month long term average. However with approximately $20 billion in outstanding tax debt owed by small and medium sized enterprises (SMEs), much of it now shifting to a more mature tier of arrears, the real question is: Why hasn't the ATO acted earlier?

Perhaps it was waiting for more robust economic growth? Hypothetically, a buoyant economy absorbs increased debt collection and liquidations without missing a step. Higher turnover may even spur growth.

But if that was what was keeping the tax collectors on a short leash then the decision earlier this year to stop treating SMEs like infants and instead enforce the law may have been triggered by a very different theory, one based on expectations of recession. Not that the ATO is likely to admit to that.

It will however admit that the increased rate of wind-ups is off a very low base. It will also point out that approximately half of the applications never proceed to winding up. And that perhaps is the most beneficial consequence of this new willingness to act. When faced with the genuine threat of liquidation, recalcitrants often discover money. And the burden on the compliant is lessened, albeit imperceptibly.

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