Bankruptcy

[CATAPILLAR]

I have a friend who owes the ATO $20,000 they have told him to pay or they will bankrupt him. If they do this will he lose his home? He is working but because his debts are so great including the ATO, friends have told him to declare bankruptcy to clear his debts but he will still owe the ATO wouldn't he?

CATAPILLAR

 

[son of baglimit]

CORRECT

THE ATO NEVER NEVER NEVER FORGET A DEBT.

AT TIMES IT MIGHT APPEAR SO, BUT THEY NEVER FORGET.

ONCE YOU ARE OWED MONEY BY THE ATO, THEY WILL THEN RESUSCITATE THE DEBT BACK TO LIFE.

 

[r m]

CORRECT

THE ATO NEVER NEVER NEVER FORGET A DEBT.

AT TIMES IT MIGHT APPEAR SO, BUT THEY NEVER FORGET.

ONCE YOU ARE OWED MONEY BY THE ATO, THEY WILL THEN RESUSCITATE THE DEBT BACK TO LIFE.

SOB - other way round - once you owe money TO the ATO... - Ignore this - I get what you mean. Debt looks like it has been written off until you are owed money by ATO then they snaffle it up for the debt which had appeared to have been forgotten.

All in caps - looks like you have an ATO story close to your heart/wallet. Will you share it with us?

 

[mikat]

it depends on the entity owing the money. is it a personal debt or company debt. is it payg, super, gst , income tax debt?
you can enter repayment arrangement if its around $20K.
if its company debt directors are liable , but if you get a directors notice to pay you have 14 days to do 1 of 4 things to avoid directors liability.

 

[ROE]

I have a friend who owes the ATO $20,000 they have told him to pay or they will bankrupt him. If they do this will he lose his home? He is working but because his debts are so great including the ATO, friends have told him to declare bankruptcy to clear his debts but he will still owe the ATO wouldn't he?

CATAPILLAR

ATO can recover the money via your pay...dont cheat tax...only 2 certain thing in life..deadth and tax ..if you own ATO tax pay it...it's not your money in the first place...you spend money you dont have, now pay up and get on with life and be smarter

20K is not much, schedule a payment with them $200 a month or something

 

[tech/a]

Id be avoiding bankruptcy like the plauge.
With electronic recording this will be very damaging for 10+ years for your friend.
It would be worth engaging some firm like Ernst Young to handle negotiations.
They know the law and will save your friend heaps of heart ache and money.

http://www.ey.com/global/content.nsf/Australia/Home

I can speak from experience here they got me out of deep dodo in the 80s
pretty to watch professionals at work.

you spend money you dont have, now pay up and get on with life and be smarter

Thats a bit tough,you can find yourself in trouble through no fault of your own---In business like a debtor who youve performed work for in good faith goes through and the banks get their share with you caught in the Domino effect.

 

[moXJO]

Id be avoiding bankruptcy like the plauge.
With electronic recording this will be very damaging for 10+ years for your friend.
It would be worth engaging some firm like Ernst Young to handle negotiations.
They know the law and will save your friend heaps of heart ache and money.

http://www.ey.com/global/content.nsf/Australia/Home

I can speak from experience here they got me out of deep dodo in the 80s
pretty to watch professionals at work.



Thats a bit tough,you can find yourself in trouble through no fault of your own---In business like a debtor who youve performed work for in good faith goes through and the banks get their share with you caught in the Domino effect.

Good advice , bankruptcy is a massive pain.Even more so if you have a company.Avoid at all costs ,or at least till you run out of other options.Bankruptcy is not a get out of paying free card.It is a huge headache and can add a lot more stress.

 

[ROE]

Thats a bit tough,you can find yourself in trouble through no fault of your own---In business like a debtor who youve performed work for in good faith goes through and the banks get their share with you caught in the Domino effect.

What do you mean? If you run a business, you collect Tax for the ATO on their behalf, so if you don't get paid that tax never get recorded.

If you make a profit you have to leave a certain amount a side for ATO

that money sitting in your bank account but it's never your money in the first place, it's ATO money until such time they want to collect it.

You don't own ATO money if the money doesnt get to your hand in the first place.

 

[awg]

Debt repayment to Govt depts can be negotiated on an individual basis.

It depends somewhat on the circumstances of how the debt arose

Normally u just get a bill with a higher than commercial interest rate.

Sometimes it is possible to negotiate that the amount be paid with lower interest rate.

They will never offer this to you.

It must be negotiated individually, based on the individual circs.

It is not easy to achieve a good outcome.

I have assisted a couple of friends negotiate with ATO and Centrelink.

Yes they can sell your house, if u have the equity.

They will also garnishee your paycheck or bank account

It is essential to commence negotiating and record all correspondence.

regards tony

 

[disarray]

ATO repayment plans are for up to 24 months and you can pay the installment weekly or monthly. interest is 14% but when the debt is paid you can claim it back and the interest is tax deductable. you receive a seperate bill in the mail to cover this payment and there is a long blurb about it not affecting your other tax payments etc. i have a big tax bill from last year so i rang the ATO yesterday to do it.

going bankrupt is a last, last resort, has he talked to the ATO at least?

 

[nioka]

THEY WILL THEN RESUSCITATE THE DEBT BACK TO LIFE.

They may even resuscitate you back to life to maintain the debt.I did beat them once. I had a small company wound up and in winding up the company the accountant did get from the a statement of tax which was paid. After the winding up of the company they sent the company a new tax assessment with an amount to be paid. We replied saying the company no longer existed. That was about 15 years ago.

 

[nioka]

ATO repayment plans are for up to 24 months and you can pay the installment weekly or monthly. interest is 14% but when the debt is paid you can claim it back and the interest is tax deductable. you receive a seperate bill in the mail to cover this payment and there is a long blurb about it not affecting your other tax payments etc. i have a big tax bill from last year so i rang the ATO yesterday to do it.

going bankrupt is a last, last resort, has he talked to the ATO at least?

Carefull here. A friend of mine did this. A week later he was issued a summons by the tax office and when he queried them about it they told him it was to secure the debt. However the judgement was recorded and that was followed by summonses from others and his business was ruined. Check if this would happen if you get time to pay.

 

[Judd]

This is not advice but just remember that under the legislation relating to debts owing to the Commonwealth, it has the ability to either write off the debt, forgive the debt or recover by installments. If it is written off it means that it has the ability to write it back on if your financial circumstances change, eg you win Lotto.

Probably best to try an negotiate, using someone experienced in these matters even if you have to pay to do so.

All the power where revenue is involved is on the Commonwealth's side. No point in trying to run from that fact.

 

[tech/a]

What do you mean? If you run a business, you collect Tax for the ATO on their behalf, so if you don't get paid that tax never get recorded.

If you make a profit you have to leave a certain amount a side for ATO

that money sitting in your bank account but it's never your money in the first place, it's ATO money until such time they want to collect it.

You don't own ATO money if the money doesnt get to your hand in the first place.

Your taxed upon earnings I agree.

Most companies dont know their final tax until around May.
In between June 30 and May you could have a major client go bust leaving you without funds to pay your creditors including the tax department.
Sure you could say tax should be set aside and even if you had the situation could and does happen.
It is possible that the combination of a bad debt and creditors including the tax department could ruin a business through no fault of that business.

 

[noirua]

I have a friend who owes the ATO $20,000 they have told him to pay or they will bankrupt him. If they do this will he lose his home? He is working but because his debts are so great including the ATO, friends have told him to declare bankruptcy to clear his debts but he will still owe the ATO wouldn't he?CATAPILLAR

There are quite a lot of fees to pay, starting with the filing of a document fee at $735. It's quite expensive to make yourself personally bankrupt.
If the ATO attempt a bankruptcy, make sure your friend applies not less than three days before the hearing stating his wish not to be made bankrupt.
On a bankruptcy order the ATO are near the top of the list to grab the funds from sales of assets.

 

[cuttlefish]

It Thats a bit tough,you can find yourself in trouble through no fault of your own---In business like a debtor who youve performed work for in good faith goes through and the banks get their share with you caught in the Domino effect

Tech is absolutely right here. All businesses have inherent risk and not all of it can be mitigated. That is why there is a voluntary administration/receivership process.

Risks can include creditors falling over, unexpected damage to property and equipment, delays by suppliers, contract disputes, declining markets, competition etc. etc. and they are not all predictable. Sometimes businesses are the most vulnerable just after securing a significant volume of new orders (i.e. when they are growing quickly).

The main responsibility of directors is that they act when they become aware that the business isn't likely to be able to meet its commitments.

 

[Trembling Hand]

Sometimes businesses are the most vulnerable just after securing a significant volume of new orders (i.e. when they are growing quickly).

Yep been there. I had a ride straight to the moon and back just as fast. Had small food shop that went from 3 employees to 30, 600 sqm factory and two retail shops, distribution in all Oz and some export all in under 3 years. Then it took me about 18 months to lose it all and end up with $400,000 personal dept.

Luckily I avoided Bankruptcy but you have to talk long and hard to your creditors. Real hard. To go into Bankruptcy over $20,000 is mad. It will cost you much more than that in freedom and higher cost for a very long time.

 

[tech/a]

Think most have if they've been in business long enough.

Upon the advice of Ernst Young (Whinny back then).
I went Part 10 back years ago and couldnt believe that $124,000 in debt didnt even take up the offer of 45c in the dollar.
They just didnt fill out the acceptance (All un secured creditors) and disappeared!

Seriously get experts in on this!

 

[mikat]

you can expert opinions for a cost, all will want to be paid up front. there are a lot of free websites , that will give most info you need.

if you declare bankrupt for individual, or are liquidated as a company, it will be on your credit file for about 7 years, and even after that you have to declare that you have been either bankrupt , or the director of a bankrupt company.

in todays market you will never ever be able to even get a credit card, let alone a house loan.

best option is to negotiate a settlement. if there is equity in a house, refinance to get the money to pay ato. they will give you 3 month extensions if they see you are making every reasonable steps to pay the debt through restructure.

a very important peice of advice.when dealing with the ATO, you have to get everything in writing. absolutely any arangement that you enter. if you ever get to court without stuff in writing, the magistrate will disregard any notion that there was any arrangement without it being on ATO letter head.

secondly, follow absolutely time frames. if you get a directors notice, you only have 14 days to act. after that its too late.

 

[CATAPILLAR]

Thankyou all for yours views and advise. This guy has more going out than coming in. But I will pass on your advise to him.
CATAPILLAR