Post COVID, the Australian Tax Office (ATO) is taking a more aggressive stance in pursuing outstanding tax debts of corporations.

Generally, prior to the ATO issuing a statutory demand to a company they would have made attempts to contact the company giving it the opportunity to resolve the tax debt.

It is therefore important not to ignore any such correspondence from the ATO as costs will escalate considerably once formal proceedings are taken and the benefit of being able to negotiate a suitable outcome to comprise the tax debt will be lost.

The ATO will generally only issue a statutory demand where the company has failed to try and negotiate a settlement, ignored them, defaulted on a payment plan, engaging in phoenixing or has come to the attention of the ATO through an audit process.

What is a Statutory Demand?

A statutory demand is issued pursuant to provisions contained in the Corporations Act 2001 (Cth) (Act).

It is a formal written demand for a Company to pay the tax debt owed to it including outstanding superannuation.

The statutory demand must be in writing and on the relevant prescribed Form 509H.

The tax debt must be for at least $4,000.00 and the tax debt has to be due and payable.

Any tax debt that is not determined yet, unable to be quantified or is contingent will not satisfy the requirements of the Act.

What should I do if I receive a statutory demand?

You have three options once you receive the statutory demand from the ATO:

1. Pay the amount
2. Negotiate a payment plan if possible
3. Dispute the amount claimed is payable which is rare in matters with the ATO as the outstanding tax or superannuation debt can easily be calculated.

Where the company disputes the tax debt can only set aside the statutory demand if:

• There is a genuine dispute about the quantum of the tax debt
• The company has a claim to off-set the tax debt
• There is a defect in the actual statutory demand, but it must cause substantial injustice if it is not set aside.

Whatever you decide to do you must respond within 21 days if you are going to dispute it or try and negotiate it otherwise it is deemed that you admit the debt.

What happens next?

If you fail to address the statutory demand the ATO can then:

• Apply to a court to appoint a liquidator to wind the company up and/or
• Issue a Director Penalty Notice (DPN) which makes the director of the company personally liable for the tax debt in certain circumstances.

How can FC Lawyers help?

Our Business and Corporate team have acted for and negotiated for companies of all sizes when it comes to the ATO.

It is important to remember this is a technical area of law and requires expert assistance.

Do not stick your head in the ground and when you get a statutory demand, seek expert legal advice as a matter of urgency.

Contact our team to discuss your needs.