GLOSS Issue 19 DEC 2014-JAN 2015 - Page 45

Australian Taxation Office (“ATO”) One of the major creditors in many businesses is the ATO. The amounts owing by an entity to the ATO may include amounts for: • • • • PAYG Withholding; Superannuation Guarantee Charge; GST; and Income Tax. Each of the above can have different due dates and different lodgement obligations. Having the correct accounting set up for ATO lodgements is vital to understanding a business’s solvency position. It is important to note directors can become personally liable for a company’s PAYG Withholding and Superannuation in the event that lodgements are not filed within three months of the due date. If you are a director of a company with overdue lodgements, it is imperative that you discuss this matter with your adviser (or an insolvency practitioner) immediately to ascertain your options. Many businesses treat the ATO as a “bank” or an alternative source of funding. It is important that the ATO is given the same respect as other “trade” creditors which an entity may require to continue ongoing trading. When a liquidator is appointed to a company, he or she can recover preferential payments made to creditors in the period leading up to their appointment. Directors should note that, in the event that their company suffers from an insolvency event, if there has been a payment arrangement through which the company has been making payments to the ATO, and the company has previously had a payment arrangement with the ATO which had been broken, not only can a liquidator recover the “preferential” payments from the ATO, but the ATO will join the director personally to any recovery action brought by the liquidator and has the power to sue the director personally for the clawed-back amounts. Therefore, any entity that may be using the ATO as an alternate funding source should analyse their solvency position and discuss same with their advisers so that they can understand their options. Banks & Other Financiers Obviously any amounts owing to Banks or Other Financiers are liabilities that need to be accounted for on the balance s