Taxation Issues – Page 2 – ░░░ INSOLVENCY INTERFACE

Liquidator wins: Court finds that third party payment is an unfair preference

court decisions, Insolvency Law, Insolvency practices, Payments to ATO, Tax debts, Taxation Issues, Voidable transactions Comments Off

Sep 062012

An insolvent company, Mortlake Hire Pty Ltd (Mortlake), owed a debt to the Australian Tax Office (ATO). A related company, Antqip Pty Ltd, paid $70,000 to the ATO in respect of Mortlake’s debt. The liquidator of Mortlake took legal action against the ATO to recover the $70,000 as an “unfair preference” under section 588FA of the Corporations Act. The ATO claimed the payment was not an “unfair preference” because it had come from Antqip and had resulted in one creditor (ATO) being substituted by another (Antqip). The Full Federal Court (on 31/8/2012) rejected the ATO’s argument and found in favour of the liquidator.

The case is Commissioner of Taxation v Kassem v Secatore [2012] FCAFC 124

For an excellent analysis of the case – which also addressed the ATO’s practice of unilaterally reallocating payments made by taxpayers of tax liabilities from one account (such as the integrated client account) to another (such as the superannuation guarantee account) – see this blogpost by Carrie Rome-Sievers, a commercial law barrister and insolvency specialist of Melbourne.

Insolvency practitioners cleared to provide tax and BAS agent services

BAS, Corporate Insolvency, Insolvency practices, Personal Bankruptcy, Returns, Taxation Issues Comments Off

Jul 202012

Liquidators who provide a tax agent or BAS service to the company they are administering do not have to be registered as tax agents or BAS agents.

That is the ruling issued by the Tax Practitioners Board on 26 June 2012 in its Information Sheet TPB(1) 12/2012.

The same rule applies to most other types of insolvency practitioners appointed under the Corporations Act or the Bankruptcy Act.

CONDITIONS APPLY:

But the rule, or exemption, only applies to work done for the client after the insolvency practitioner’s appointment. During the pre-appointment period the ban on unregistered persons providing a tax agent service or a BAS service for a fee or reward will apply.

The insolvency practitioners exempted under the ruling are liquidators, provisional liquidators, company administrators, administrators of deeds of company arrangement, receivers, receivers and managers, and bankruptcy trustees.

But the exemption might not apply to insolvency practitioners who act as agents for mortgagees in possession. On one reading of the Information Sheet it seems that because such insolvency practitioners are not agents of the company (as are liquidators, administrators and receivers) then they might not be performing the tax/BAS agent services “in accordance with the duties and responsibilities of the insolvency practitioner under the terms of the relevant legislation” in a situation “analogous to that of a self-preparing entity”. (See paras. 20 and 21.)

The Information Sheet also addresses the situation where, during the post-appointment period, an insolvency practitioner “bring(s) in outside consultants such as accountants or bookkeepers to deal with the entity’s tax or BAS issues”. The Tax Practitioners Board says that such consultants would need to be registered.

In other words, the exemption only applies where the insolvency practitioners or his or her employees carry out the tax work.

To see the TPB Information Sheet CLICK HERE.

New law on companies’ non-compliance with PAYG withholding and superannuation guarantee obligations

Insolvency Law, Insolvency practices, Priority Debts, SGC, Superannuation liabilities, Tax liabilities, Taxation Issues Comments Off

Jun 212012

On 20 June 2012 the following documents concerning proposed new tax laws on non-compliance with PAYG withholding and superannuation guarantee obligations was posted on the website of the Parliament of Australia:

Explanatory Memorandum to law.
Tax Laws Amendment (2012 Measures No. 2) Bill 2012 (Third reading).

Both documents can be read and/or downloaded HERE.

On the 21 June the legislation went to the Senate.

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Retired federal court judge claims white collar criminals are treated differently

Offences, Taxation Issues, White collar crime Comments Off

Jun 052012

Ray Finkelstein, QC, retired federal court judge, writing in the March 2012 edition of the Australian Tax Office publication “Targeting tax crime: A whole-of-government approach”, says:

“There is significant law breaking by persons from the middle classes. When these people commit crimes they are seen to be, and are, treated differently. This is especially true in the case of ‘white collar crime’ …. If the distinction between the two kinds of crimes is removed this would reduce the problems resulting from inconsistencies in sentencing”.

Mr Finkelstein’s article, titled “Crime and punishment: White collar crime vs true crime”, is reprinted below. In the article he takes issue with judges who have a rationale in sentencing white collar criminals that is different from that which they employ in sentencing ‘true’ criminals, and suggests that it may be necessary to relax some features of criminal law for the purposes of combating white collar crime.

The original article is available at http://www.ato.gov.au/content/downloads/snc00313370.pdf

“Crime and punishment: White collar crime vs true crime”

by The Honourable Ray Finkelstein, QC:

“There is a longstanding myth, slowly being eroded, that criminal behaviour is largely committed by those in a lower socio economic class.

The studies I have seen that address this define ‘true crimes’ as those that (1) directly harm or violate the rights of others or (2) constitute inherently immoral activity. When it comes to the punishment of true crimes, a court considers a blend of just desserts, reformation and crime control: rehabilitation, retribution, deterrence, incapacitation (prison) and restitution.

In the world in which we live it should be evident that it is wrong to assume that criminal behaviour is confined to lower socio economic class. There is significant law breaking by persons from the middle classes. When these people commit crimes they are seen to be, and are, treated differently. This is especially true in the case of ‘white collar crime’.

Here I refer to crimes committed by people of high social status in the course of their occupation. One thing that stands out about white collar crime is that it is not due to poverty and the like. Also the ‘cost’ of white collar crime is probably much higher than true crime. Compare a bank robber who steals $25,000 from a neighbourhood bank with the corporate manager who steals $2 billion from his company.

How do judges punish white collar crimes? As a general rule the judge’s rationale in sentencing is different from sentencing true criminals. General deterrence – that is deterring others in similar positions from engaging in like behaviour – is usually the sole guiding principle. Retribution seems to have little role to play. Most judges believe that the humiliation, loss of job and loss of status experienced by white collar criminals when they are apprehended, brought to trial and punished, is usually sufficient punishment.

There are, of course, some white collar crimes where an element of punishment cannot be avoided. This is usually confined to crimes that involve a breach of public trust, a serious effect on the market, or a very large fraud loss.

What is interesting is that even though deterrence is the primary goal – imprisonment, when available, is regarded as a last resort. Probably the reason is a belief that imprisonment has a far greater detrimental effect on a white collar criminal. In some cases the judge will take into account the accused’s ability to make restitution as a factor that eliminates the need for a prison sentence.

This approach to sentencing inevitably leads the public to the conclusion that there is a law for the rich and a law for the poor. The problem that leads to this perception is what I see to be a tension between the aim of general deterrence (which usually requires a harsh penalty – often imprisonment if it is available) and the particular (personal) attributes of white collar criminals.

When resolving this conflict, judges tend to compromise – they impose weekend sentences, short sentences or suspended sentences. I do not agree with this approach. It is, I think, necessary for white collar crimes, especially those that involve violations of trust, market manipulation, share market manipulation, anti-trust violations and the like to be regarded in the same way as other fraudulent conduct such as false pretences, or obtaining money by deception. They should be regarded in the same way because they are of a similar character. That is to say, most (I do not say all) white collar crimes are not really different from true crimes.

If the distinction between the two kinds of crimes is removed this would reduce the problems resulting from inconsistencies in sentencing.

A more difficult issue is whether it is necessary to relax some features of criminal law for the purposes of combating white collar crime. The fight against white collar crime is an immense task and regulatory authorities have limited resources. Establishing a guilty mind at trial is always difficult and sometimes impossible. The courts’ narrow approach to construction of statutes often defeats parliament’s true intention. The difficulty of obtaining independent (for example, documentary) evidence is well known. All this inhibits the proper pursuit of white collar crime.

The courts do not possess power to overcome all these difficulties. Parliamentary intervention is necessary in some areas; but courts do have an essential role to play.

In the first place when acting as a court of construction the court could adopt a pragmatic approach to the definition of crimes. Second, as a court of construction the court could limit those crimes in which the prosecutor must establish a guilty mind. Finally, perhaps there may be some crimes where the courts can state that the standard of proof should be lower than ‘beyond reasonable doubt’ and suggest that parliament should bring about the necessary change.

The most likely contenders are those statutes which have introduced civil penalties for contraventions that are also criminal. Parliament has already decided that a lower standard of proof is in order for these offences, provided there is a lower penalty. In substance, all that is needed is for parliament to legislate for an appropriately higher penalty for those offences.”

http://www.ato.gov.au/content/downloads/snc00313370.pdf

END

Second attempt at tax laws to impose director liability for employee superannuation entitlements

Corporate Insolvency, Employee Entitlements, Insolvency Laws, Offences, Tax debts, Tax liabilities, White collar crime Comments Off

Apr 202012

The Government is again proposing to extend the director penalty regime to cover employee superannuation entitlements.

The original Bill was introduced to Parliament on 13 October 2011. (I wrote about this in my blog post on 18/10/2011: see “Parliament sees new tax laws to protect superannuation and deter phoenix companies”.)

In its media release on 18 April 2012, the Government says it “held further consultation with industry after withdrawing an earlier version of the legislation in November. Following this consultation, the Government has made amendments to the draft Bill, including to ensure that new directors have time to familiarise themselves with corporate accounts before being held personally liable for corporate debts and requiring the ATO to serve director penalty notices on directors in all cases before commencing action.”

This is the full GOVERNMENT MEDIA RELEASE of 18 April 2012:

“Draft legislation released today will help to protect workers’ superannuation entitlements, said Assistant Treasurer, David Bradbury.

Under the director penalty regime, which has been in operation since 1993, company directors are personally liable for amounts withheld by their company that have not been remitted to the Australian Taxation Office (ATO). The Tax Laws Amendment (2012 Measures No. 2) Bill 2012: Companies’ non-compliance with PAYG withholding and superannuation guarantee obligations will extend the regime to cover Superannuation Guarantee amounts.

As well as strengthening directors’ obligations to arrange for their companies to meet Pay As You Go (PAYG) withholding and superannuation obligations, the measure will also help counter phoenix behaviour.

“The Gillard Government is committed to protecting workers’ entitlements,” said Mr Bradbury.

“This legislation makes it clear that directors have an obligation to ensure that provision is made for the ongoing payment of workers’ superannuation.

“It also ensures that fraudulent directors who use phoenix companies to try and avoid their debts will be held personally liable for their PAYG withholding and superannuation obligations.”

The Government held further consultation with industry after withdrawing an earlier version of the legislation in November. Following this consultation, the Government has made amendments to the draft Bill, including to ensure that new directors have time to familiarise themselves with corporate accounts before being held personally liable for corporate debts and requiring the ATO to serve director penalty notices on directors in all cases before commencing action.

The draft legislation also includes a new defence for directors liable to penalties for superannuation debts where, broadly, they reasonably thought the worker was a contractor and not an employee,” he said.

“The measure strikes the appropriate balance between protecting workers’ entitlements while not discouraging people from becoming company directors.”

The Government looks forward to receiving submissions from the public about this important reform. Submissions close on 2 May 2012 to allow for the introduction and passage of the legislation in the Winter 2012 sittings of Parliament.

The draft legislation, explanatory memorandum, and a summary of the policy changes can be found on the Treasury website.

CANBERRA 18 April 2012″

Click on the following link to go to THE TREASURY WEBSITE LOCATION WHERE DETAILS WILL BE FOUND. The closing date for submissions regarding the proposed legislation is 2 May 2012.

End

GST liability on asset sales by mortgagees: Treasury review completed

GST, Insolvency practices, Tax debts, Tax liabilities, Taxation Issues Comments Off

Feb 172012

A draft of legislation to clarify how the GST Act operates where a mortgagee in possession sells the property of a corporation has been issued for comment .

This exposure draft, issued on 14 February 2012, follows a consultation paper issued on 7 June 2011. The Treasury says that: “The exposure draft material has been developed taking into account comments made by stakeholders.”

What those comments and views were will be available for public viewing on the Treasury website soon. It is Treasury practice to publish submissions on the consultation paper after the legislation has been introduced into the Parliament.

The Treasury says that “The exposure draft legislation seeks to clarify the GST law for entities in the mortgage lending sector so that representatives of incapacitated entities will no longer need to differentiate between different provisions of the GST law and will be able to report and account under a single registration.”

The Treasury has invited interested parties to comment on the latest exposure draft. Closing date for submissions: Tuesday, 13 March 2012. Address written submissions to:
The General Manager
Indirect Tax Division
The Treasury
Langton Crescent
PARKES ACT 2600
Email: gstpolicyconsultations@treasury.gov.au

Copies of the Exposure Draft, the Explanatory Memorandum and the original June 2011 Consultation Paper are available HERE.

My own submission to the June 2011 consultation paper was as follows:

“I make this brief submission in response to your Consultation Paper of 7 June 2011, in which it is proposed that section 195‑1 of A New Tax System (Goods and Services Tax) Act 2000 (the GST Act) be amended to expressly provide that Division 105 operate to the exclusion of Division 58 where a mortgagee in possession or control sells the property of a corporation. You have also asked a much broader question, which is “Is there an alternative way to better achieve the Government’s policy objective of a representative of an incapacitated entity being liable for GST for supplies of property in their possession or control belonging to a corporation?”

In my opinion:

Division 105 of the GST Act should not be amended as is proposed.
Where a mortgagee takes possession of most of the assets of a corporation, the GST outcome should be the same regardless of the mechanism the mortgagee employs to exercise its rights of repossession and sale.

ATO was just resolving a conflict

The proposal in the Consultation Paper seems to be guided and influenced by ATO Interpretive Decision 2010/224. However, that decision by the ATO does not seem to give much consideration to the tax and equity issues involved. Rather, it just seems to resolve the conflict by applying “the accepted principle of statutory interpretation (which) is that a general provision would give way to the more specific provision where there is conflict between the provisions”.

Not just a tax issue

There is a good reason why the term ‘controller’ in the Corporations Act 2001 includes a mortgagee who takes possession or control of a corporation’s property in the event of a default by the mortgagor. Its arises out of abuses of corporate insolvency accountability principles that used to occur prior to 1993. Back then, to deprive the ATO of its right to priority payment of outstanding group tax, and to avoid the reporting and compliance duties imposed under company law, banks and other mortgagees decided to use the “agent for the mortgagee in possession” option. Amendments arising out of the ALRC’s 1988 General Insolvency Inquiry took the attractive advantages out of this option.

Even though the “agent for mortgagee in possession” and “mortgagee in possession” mechanisms are now caught by the Corporations Act, I believe we ought to carefully consider what influence the proposed change to Division 105 of the GST Act may have on the choices that mortgagees make when taking possession of a company’s assets. (I refer here to those who have charges over most of a company’s assets.) No doubt, if there are tax advantages or cost advantages in them, these alternative mechanisms will become popular again. In which case we ought to consider whether this development might be to the detriment of accountability to employees, other creditors and the public.

Division 58

It appears to me that Division 58 was drafted as it was because there would have seemed to be no logical or perceptible reason why the GST outcome of a mortgagee taking possession of a company’s assets should be determined by whether they appointed someone called a “receiver” or someone called an “agent for the mortgage”. Personally, although I have read lots of relevant material I still cannot see why the GST outcomes should be different. However, I can see a case for applying a provision such as Division 105 where a financier takes possession of an asset or two under right given in chattel mortgages or the like.

Division 105

If Section 105.5 of the GST Act was intended to apply in a situation where a mortgagee takes possession of most of the assets of a company, I find this hard to see in its narrow wording. It seems to apply to a very specific situation. In my view Treasury should focus in this review on uncovering the meaning of Division 105 of the GST Act and defining what situation – other than those addressed by Division 58 of the GST Act – that Division 105 is trying to address, or should address.”

Parliament sees new tax laws to protect superannuation and deter phoenix companies

Insolvency Laws, Regulation, Tax liabilities, Taxation Issues Comments Off

Oct 182011

On 13 October 2011 the Australian Government presented a bill which the Minister says “amends the tax law to better protect workers’ entitlements to superannuation, strengthen the obligations of company directors and enhance deterrence of fraudulent phoenix activity”.

Schedule 3 of the Tax Laws Amendment (2011 Measures No.8) Bill 2011 is described in the Second Reading speech by the Minister, Mr Bill Shorten, as follows:

“These amendments will provide disincentives for directors to allow their companies to fail to meet their existing obligations, particularly obligations to employees. They do not introduce new obligations on the company but, rather, penalise company directors who are failing to ensure that their companies meet their obligations.

These outcomes are achieved by extending the director penalty regime to superannuation guarantee. This will make directors personally liable for their company’s failure to meet its obligations to pay employee superannuation.

Secondly, this will allow the commissioner to commence recovery against company directors under the director penalty regime without issuing a director penalty notice. This power is limited to situations where the company’s unpaid pay-as-you-go (or PAYG) withholding or superannuation liability remains unpaid and unreported, three months after becoming due.

Thirdly, it is making company directors and, in some limited cases, their associates liable to a tax which, in effect, reverses the economic benefit of a PAYG withholding credit. This tax only applies if directors or their associates are entitled to a credit for amounts that have been withheld from payments made to them by the company and the company has failed to meet its obligation to pay PAYG withholding amounts to the commissioner. Further criteria must be satisfied before associates are liable.

Together, this package of amendments will improve the likelihood that employees will receive the superannuation they are entitled to. It will reduce the ability of directors to avoid paying director penalties for their company’s superannuation guarantee and PAYG withholding debts. Further, it will increase the disincentives for directors to allow their company to fail to meet its existing obligations.”

Introduced with the Pay As You Go Withholding Non-compliance Tax Bill 2011, the bill amends, inter alia, the Taxation Administration Act 1953 to allow the Commissioner of Taxation to commence proceedings to recover director penalties in certain circumstances without issuing a director penalty notice; the Income Tax Assessment Act 1997, Taxation Administration Act 1953 and Taxation (Interest on Overpayments and Early Payments) Act 1983 to make directors and their associates liable to pay as you go withholding non-compliance tax in certain circumstances; and the Corporations Act 2001, Superannuation Guarantee (Administration) Act 1992 and Taxation Administration Act 1953 to make directors personally liable for their company’s unpaid superannuation guarantee amount.

LINKS:

Minister’s Second Reading speech on 13/10/2011.

Text of Bill (See Schedule 3)

Explanatory memoranda (See Chapter 3) For a concise comparison of key features of the new law and the current law, see the chart at pages 30 & 31 of the Explanatory Memorandum.

_______________________________________________________

On 18 October 2011 the Treasury published the thirteen submissions it received in response to the consultation on an earlier exposure draft of this legislation. To view these click HERE.

ATO authorised to settle large unfair preference claims

Directors indemnities, Insolvency practices, Payments to ATO, Taxation Issues, Voidable transactions Comments Off

Aug 122011

In certain circumstances, and without taking legal action, liquidators may now get back unfair preference payments of up to $500,000 made to the ATO.

The ATO says:

“We have now obtained approval to settle claims with a monetary value of up to $500,000, provided we can establish the proposed settlement is in accordance with legal principle and practice as advised by our legal services branch.”

Details of the terms and conditions are on the ATO’s website page – written for liquidators – headed “Preference payments for companies” (last modified on 8 August 2011).

The current web page is an amended version of a page issued in July 2010. That page was about payments not greater than $25,000, whereas the current page focuses on the settlement of claims over $25,000. The settlement of claims over $25,000 needs the approval of the ATO’s legal services branch, whereas claims under $25,000 can, apparently, be agreed without that level of approval.

The ATO describes unfair preferences as follows:

“Unfair preferences usually involve transactions that discriminate in favour of one creditor at the expense of other creditors. The aim of the law outlined below is to ensure creditors are treated equally by preventing any unsecured creditors from receiving an advantage over others. The proceeds of any property you, as a liquidator, recover and realise will form part of the funds available for distribution amongst all unsecured creditors after the winding-up expenses have been paid.”

The liquidator, in a letter to the ATO with relevant evidence attached, needs to establish that he or she has a valid claim for voidable transaction under section 588FE of the Corporations Act 2001. The ATO web page describes in detail the evidence and information that liquidators must provide.

The ATO will need to be satisfied that there is no statutory defence available to it. But the liquidator “(does not) have to demonstrate that a statutory defence is not available”.

Crucially, for claims either under or over $25,000, the claim will not be settled without court proceedings if the ATO decides it should seek an indemnity against the directors of the company (section 588FGA). This is because where directors are to be involved in this way, the courts have found that they have a right to be heard on the primary dispute between the liquidator and the ATO.

In assembling information for a claim, the liquidator can obtain from the ATO itself copies of relevant documents concerning the company’s tax affairs. There is no charge for this service, and no need for an application under the Freedom of Information legislation.

The ATO says it cannot settle unfair preference claims made later than is allowed under section 588FF. [NOTE: An application under section 588FF(1) may only be made (a) during the period beginning on the relation-back day and ending (i) 3 years after the relation-back day; or (ii) 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during period (a). ]

Unauthorised amendment of receiver’s BAS gets through ATO

BAS, GST, Insolvency practices, Returns, Taxation Issues Comments Off

Jul 222011

The Australian Taxation Office has been asked to explain how it is possible for a BAS lodged by a representative of an incapacitated entity (receivers and managers) to be later amended by another entity without authorisation. In the actual case that gave rise to the question, a GST refund of approximately $650,000 was paid out to the receivers as a result of the unauthorised amendment. The case concerned sale of real property by the receivers.

The Tax Institute brought this matter to the ATO’s attention in March 2011 at a meeting of one of the ATO’s community consultation forums, the GST Sub-committee of the National Tax Liaison Group.

Minutes of the Meeting, recently published on the ATO website, are reproduced in full below. It appears that changes to ATO procedures may have already been made.

________________________________________________________

GST Minutes, March 2011

Agenda item 19 – Amendments of BAS lodged by representatives of an incapacitated entity. Issue 13.40 raised by the Tax Institute.

The Taxation Institute requests an explanation as to how it is possible for BAS lodged by a representative of an incapacitated entity (receivers and managers) to be later amended by another entity. Are there any checks in the BAS lodgment system for these unauthorised amendments to be stopped?

The facts relevant to this issue are that two individuals (partners in an accounting firm) were appointed as receivers and managers to sell certain new residential premises owned by a property developer that had defaulted on its repayments to a bank. The receivers had been appointed by the bank.

At the time of lodging the BAS as representatives of the incapacitated entity, the receivers were not satisfied on the basis of the information made available that they could pay GST under the margin scheme and instead paid GST under the basic rules, in respect of all sales of property. The sales proceeds were all paid to the bank.

After their appointment as receivers concluded, the property developer amended the BAS lodged by the receivers (through the business or tax agent portal). A refund of approximately $650,000 was processed without the ATO apparently doing any verification or other analysis (including as to section105-65 of Schedule 1 to the TAA). That refund was paid into the bank account of the receivers and managers (as this was still current with the ATO). This was the first time the receivers became aware that their BAS had been amended.

The matter now involves an ATO investigation of various issues, including the margin scheme valuation. The only issue for the purpose of this request is whether the ATO has any checks in its systems for such unauthorised amendments.

ATO response

Representatives of insolvent or incapacitated entities must be registered, as identified in section 58-20 of the GST Act. The ATO’s practice is to register representatives under a separate Client Account Centre (CAC), but under the same ABN as the incapacitated entity. This enables transactions attributable to the period of receivership/ administration to be recorded separately to those undertaken by the entity prior to and post the period of receivership/ administration.

Authorised contact persons, as nominated by the representatives, are listed against the separate role for the representative. Although the CAC appears on the account of the incapacitated entity, the representative is effectively treated as a separate entity. As a result, only the authorised person is allowed to lodge GST returns and amendments and make changes affecting the representative’s CAC.

Accordingly, a GST return lodged by a representative of an incapacitated entity should not be amended by a person associated with the incapacitated entity itself where that person is not authorised by the representative.

However, it is possible for someone, even where not authorised, to lodge a GST return or amendment. This could be done, for example, in paper form or through the business portal. Where someone has access to the portal in respect of the relevant ABN, that access is not restricted to specific CACs. It should be noted that the portal is a safe environment; it is password protected and encrypted, however this does not prevent unauthorised action being taken by those with access to the portal. If, for example, a person authorised by the company seeks to lodge an amendment in respect of a period the company was in receivership, the fact that the amendment request is not authorised may by identified by our systems and if so the amendment would not be processed. However, this will not occur in every case. Note that all transactions in the portal are logged; identifying the specific user taking the actions, and thus even if the amendment is processed, the fact the amendment request is unauthorised could later be identified.

The ATO take a risk based approach to reviewing lodgments, including amendments. This includes pre and post issue checks to identify fraudulent behaviour.

In light of the question that has been raised, we are considering whether further steps can be taken to reduce the risk of unauthorised amendments in these circumstances.

Meeting discussion

The ATO acknowledged that the situation as highlighted in the submission can occur on the portal. This issue has initiated action by the ATO to put in place steps to stop unauthorised amendments to BAS especially in these circumstances. The ATO considers this as a risk that requires further investigation and management to mitigate.

It was suggested by members that during the period that an entity was in insolvency, the ATO should incorporate steps to close off the incapacitated entity’s registration. The ATO is exploring ways for locking down those periods when administrators have been appointed or to trigger a review for amendments made to the BAS in those periods. The ATO is investigating the matter and how processes can be changed so that there is no reoccurrence.

The ATO also noted that access to the portal is logged, so unauthorised access in these cases can be identified. The ATO confirmed that if the representative entity has not made the relevant amendment (it has been made without authorisation by the formerly incapacitated entity), the representative entity would not be liable for a penalty if the amendment is a false or misleading statement.

Action item	2011.03.15 Amendments of BAS lodged by representatives of incapacitated entity
Description	The ATO will provide an update out of session or at the next meeting on the progress made to have further controls in place so that BAS cannot be amended for periods in the past when an entity was incapacitated.
Responsibility	ATO
Due date	15 June 2011

Draft laws released on director liability for unpaid super

Employee Entitlements, Insolvency Laws, Insolvency practices, Priority Debts, Taxation Issues, White collar crime Comments Off

Jul 142011

Draft Australian tax laws intended “to better protect workers’ entitlements to superannuation, strengthen director obligations and enhance deterrence of fraudulent phoenix activity” were released on 5 July 2011 for public consultation. Treasury states that:

” The main aspects of these amendments involve:

extending the director penalty regime beyond its current application to Pay As You Go (PAYG) withholding to make directors personally liable for their company’s unpaid superannuation guarantee amounts;
allowing the Commissioner of Taxation (the Commissioner) to immediately commence recovery of all director penalties when the company’s unpaid liability remains unpaid and unreported three months after the due day, regardless of the character of the company’s underlying liability; and
providing the Commissioner with the discretion to prevent directors and, in some instances their associates, from obtaining PAYG withholding credits where the company has failed to pay amounts withheld to the Commissioner.”

To see the Explanatory Memorandum and/or the Exposure Draft Legislation CLICK HERE.

Closing date for submissions: Monday, 1 August 2011

I intend to write more about this soon.

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