• 3 Detailed Findings

    3.1 Review Question Outcomes

    As part of our review three questions were considered for each of the 80 cases. The questions and review outcomes are shown below.

    • Did the Tax Office provide the taxpayer with the opportunity to meet their obligations and discuss alternative arrangements to avoid insolvency?

    Yes: 80 case

    No: 0 cases

    • Were the actions of the Tax Office, in seeking payment of outstanding tax in this case, too early and did this lead to the premature insolvency of the business that could reasonably be considered viable based on the information provided by the taxpayer and available to the Tax Office?

    Yes: 0 cases

    No: 80 cases

    • Were there other practical options available to the Tax Office that should have been taken to avoid the business being declared insolvent, without putting the collection of tax at unreasonable risk?

    Yes: 0 cases

    No: 80 cases

    3.2 Review Observations

    Review observations from the 80 cases reviewed are as follows:

    • In all 80 cases reviewed, the Tax Office issued necessary legal notices prior to the taxpayer being wound up/bankrupt by the Tax Office.
    • In 78 of the 80 cases reviewed, the Tax Office made telephone contact with the taxpayer prior to commencing formal insolvency/bankruptcy proceedings.
    • In two cases the Tax Office was unable to make telephone contact with the taxpayer prior to commencing formal insolvency/bankruptcy proceedings. In these cases, the Tax Office attempted to contact the taxpayer on all available phone numbers and formal legal notifications were provided to registered addresses for the taxpayer.
    • On average, the Tax Office made or attempted telephone contact with the taxpayer approximately 17 times prior to the taxpayer being made insolvent/bankrupt.
    • On average, the length of time between the Tax Office’s initial telephone contact with the taxpayer in relation to outstanding tax debts and the final telephone correspondence prior to the taxpayer being made insolvent/bankrupt was a period of approximately 4.6 years.
    • On average, the length of time between the Tax Office’s initial telephone contact with the taxpayer in relation to outstanding tax debts and the taxpayer being made insolvent/bankrupt was approximately 5.6 years.
    • In all instances where the taxpayer provided financial information to support their viability and ability to service the tax debt, this information was assessed by the Tax Office and if the taxpayer was deemed viable by the Tax Office a payment arrangement was entered into.
    • On average, two payment arrangements were entered into and defaulted by taxpayers prior to the taxpayer being made insolvent/bankrupt. Six cases were identified where the taxpayer defaulted on 10 or more payment arrangements prior to being made insolvent/bankrupt.
    • In 56 of the 80 cases reviewed, at least one payment arrangement was entered into with the taxpayer prior to the taxpayer being made insolvent/bankrupt. In the remaining 24 cases, the taxpayer either:
      • put forward a payment arrangement that was deemed unsatisfactory by the Tax Office and was therefore not accepted; or
      • the taxpayer failed to put forward a payment arrangement to the Tax Office.
       
    • In relation to additional recovery actions taken by the Tax Office prior to the taxpayer being made insolvent/bankrupt, we note as follows:
      • From the sample of 80 cases, 19 cases were corporate insolvency cases and 61 were individual bankruptcy cases. In relation to the insolvency cases, Director Penalty Notices were issued in 17 of the 19 cases.
      • From the sample of 80 cases, garnishee notices were issued in at least 47 of the cases. In a further 30 cases, garnishee options were investigated by the Tax Office but no viable garnishee options were identified.
       
      Last modified: 10 Feb 2017QC 42288