Australian group faces $7 billion tax bill

Small business indebtedness to the IRS has spiraled out of control – and there’s one group they’re hitting hard.

Tax time has come and after two years of chilling out, the tax authorities are now getting serious. No more Mr. Nice Guy. Small business indebtedness to the IRS has spiraled out of control and they are coming to collect.

The ATO has sent friendly warning letters and more than 20,000 taxpayers have responded by paying or making payment arrangements.

Which is back a little bit. “About $4 billion or so already,” ATO Deputy Commissioner Jeremy Hirschhorn said on May 19. But taxpayers who don’t respond to the letters should not expect the ATO to give up.

“Where taxpayers don’t commit, the ATO is… take firmer actions,” he said.

During the pandemic, the ATO helped the economy. It chose not to send companies have gone bankrupt by not chasing debts. Back then, the government was handing out money to business and no one cared about increasing revenue. The priority was to save jobs and livelihoods. Now, however, new treasurer Dr. Jim Chalmers on a trillion dollars in debt. He will need all the money the ATO can find to try and improve the budget balance.

Where can the ATO find that money? By following the Hiluxen. That’s right, the biggest sector that owes money to the tax authorities is the crafts (and developers). Build† They owed a whopping $7.22 billion in fiscal year 2020, as the following chart shows. If the ATO gets that back, we can afford about half of one of our new nuclear submarines.

“Our first focus will be on taxpayers with higher debt before we include taxpayers with all other debt,” said ATO Deputy Commissioner Vivek Chaudhary.

Recently, the ATO has been sending out 30-40 letters called Director Penalty Notices every day. If you get one of these, you’re in big trouble. It means you have to pay otherwise they will start some very malicious processes. In the worst case scenario, if you can’t or won’t pay, the ATO will sue you, you lose, they liquidate your business and because your business loan is secured against your home, you lose your home too. (About half — 49 percent — of small business loans are secured against real estate.) You end up with legal bills to pay, no business, and nowhere to live.

Actually, that might not be quite the worst-case scenario when dealing with the ATO. In the worst case scenario, you have a place to live, but there are bars on the windows and you can’t get out… Yes, the ATO corners people if they do something wrong. Jail. The big house.

To be fair, if you end up in jail, it will be for more than just not paying a debt. But beware if you’ve done something dodgy. For example, in May this year, a swimming teacher was sentenced to three years in prison for submitting $250,000 in false claims for GST refunds. She is now at the Brisbane Women’s Correctional Centre. And she had to pay back the money. The number of prosecutions pursued by the ATO plummeted during Covid, but they are now likely to bounce back.

Most debtors simply repay their ATO debts. The ATO is good at arranging payment plans so that you can pay them back over time. But some companies owe more than they can afford and go out of business.

As the following chart shows, there have been relatively few construction foreclosures in the past two years.

The reaper put down his scythe. Some businesses that would normally have thinned out were instead given a chance to continue. Some have done well, others only seem to have done well.

Considering what they owe the taxman, they probably should have folded a while ago.

As 2022 progresses, you can expect quite a few Hiluxes to be repossessed by the bank and a few construction projects to stall if the companies they run go bankrupt.

Read related topics:Tax time

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