When we take firmer action
Most taxpayers do the right thing and pay their tax in full and on time. Taxpayers who don't pay, or don't engage with us to pay their debt, may find we take firmer action to collect it.
To decide if we start firmer action, and which actions to take, our approach is deliberate and targeted. We will consider your compliance history and your engagement with us.
We are more likely to start firmer action when you:
- refuse to engage with us
- continue to ignore SMS and letter reminders
- repeatedly default on agreed payment plans
- don't take steps to resolve your financial situation to manage your tax debt
- have been subject to an audit where we detected deliberate avoidance and payment avoidance continues
- appear to be engaging in illegal phoenix activities: when a company is liquidated, wound up or abandoned to avoid paying its debts – a new company is then started to continue the same business activities without the debt
- are a business choosing to allow amounts of GST, PAYG withholding and employee super to go unpaid.
You can avoid our firmer action by paying your debt in full and on time, or you may be able to set up a payment plan.
If you need additional support, we'll work with you to understand your situation and provide tailored help specific to your circumstances. You should contact us or your registered tax professional about your situation as early as possible.
What firmer action could include
Firmer action may include:
- issuing a garnishee notice
- issuing a director penalty notice
- disclosing your business tax debt to registered credit reporting bureaus.
In most cases, we will try to collect your debt through these firmer actions, however in some cases, we may move on to take other actions or legal action.
Garnishee notice
We can issue a garnishee notice to a person or business that holds money for you or may hold money for you in the future. This requires them to pay your money directly to us to reduce your debt. We'll send a copy of the notice to you.
For individuals, we may issue a garnishee notice to:
- your employer or contractor
- banks, financial institutions and building societies where you have accounts
- people who owe money to you from the sale of real estate, such as purchasers, real estate agents and solicitors.
For businesses, we may issue a garnishee notice to:
- banks, financial institutions and building societies where you have accounts
- trade debtors
- suppliers of merchant card facilities.
Director penalty notice
As a company director, you become personally liable for your company's unpaid amounts of:
- pay as you go withholding
- goods and services tax
- super guarantee charge.
These amounts that you are personally liable for are called director penalties. We can recover penalty amounts 21 days after we issue you a director penalty regime (DPN).
If you are a director of multiple companies, DPNs we issue may capture the total value of unpaid tax and super across all related entities. A separate DPN will issue for each entity.
We can recover the amounts of the director penalty by:
- issuing garnishee notices
- offsetting any of your tax credits against the director penalties
- initiating legal recovery proceedings against you.
Disclosure of business tax debts
If you have overdue business tax debts and meet certain criteria, you may have your tax debt reported to registered credit reporting bureaus (CRBs). If you meet the reporting eligibility criteria, we will send a Notice of intent to disclose that advises you of actions you can take to stop this disclosure from proceeding.
If you've already engaged with us to manage your tax debts, the debts will not be reported to CRBs.
Other actions we can take
We may take these other actions to recover your debt if we consider it appropriate having regard to your circumstances.
Direction to pay super guarantee charge (SGC)
We can issue employers with a direction to pay overdue SGC (or estimates of SGC) within a specified period. When an employer receives a direction to pay, they must pay the full amount specified in the direction.
Failure to comply with the direction is a criminal offence and can result in penalties or imprisonment.
For more information about directions to pay superannuation guarantee see PS LA 2011/18.
Departure prohibition order
A departure prohibition order is an enforcement action that prevents taxpayers with tax debts from leaving Australia. They remain in effect until the debt is paid or a satisfactory arrangement is made with us.
For more information see PS LA 2011/18.
Freezing orders
We can apply to the Supreme Court or Federal Court for a freezing order that temporarily prevents a taxpayer or third parties from disposing of, selling, moving, or encumbering assets, where there’s evidence they may do so to avoid payment of a tax debt. This can apply to assets within Australia or internationally.
For more information see PS LA 2011/18 and the Federal Court Website on Freezing Orders Practice Note (GPN-FRZG)External Link.
Securities
We can require security from a taxpayer where we:
- have reason to believe that the taxpayer is carrying on an enterprise in Australia and intends to carry on that enterprise for a limited time only, or
- reasonably believe the requirement is otherwise appropriate, having regard to all relevant circumstances.
Security can be requested at any time that the Commissioner reasonably believes is appropriate and as often as the Commissioner reasonably believes is appropriate. The security can be required for either an existing or future tax-related liability.
For more information see PSLA 2011/14