• 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 cases

    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 or made bankrupt by the Tax Office (Prior year: 80 cases).
    • In all 80 cases reviewed, the Tax Office made telephone contact or attempted to make telephone contact with the taxpayer prior to commencing formal insolvency or bankruptcy proceedings (Prior year: 78 cases).
    • On average, the Tax Office made or attempted telephone contact with the taxpayer at least 17 times prior to the taxpayer being made insolvent or bankrupt (Prior year: 17 times).
    • 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 or bankrupt was a period of 3.8 years (Prior year: 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 or bankrupt was approximately 4.5 years (Prior year: 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 (Prior year: all cases).
    • On average, at least two payment arrangements were entered into and defaulted by taxpayers prior to the taxpayer being made insolvent or bankrupt (Prior year: at least two arrangements). Five cases were identified where the taxpayer defaulted on 10 or more payment arrangements prior to being made insolvent or bankrupt (Prior year: six cases).
    • In 58 of the 80 cases reviewed, at least one payment arrangement was entered into with the taxpayer prior to the taxpayer being made insolvent or bankrupt (Prior year: 56 cases). In the remaining 22 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 or bankrupt, we note as follows:
      • From the sample of 80 cases, 44 cases were corporate insolvency cases and 36 were individual bankruptcy cases. In relation to the insolvency cases, Director Penalty Notices were issued in 37 of the 44 cases (Prior year: 17 of 19 cases).
      • From the sample of 80 cases, garnishee notices were issued in at least 52 of the cases (Prior year: 47 cases). In a further 23 cases, garnishee options were investigated by the Tax Office but no viable garnishee options were identified (Prior year: 30 cases).
       
      Last modified: 10 Feb 2017QC 46724