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Federal Taxes

The team at Meyer Vandenberg has extensive experience in dealing with Federal taxes like goods and services tax and income tax, including capital gains tax and “Division 7A” issues.

Two things are certain about tax — tax law is complex and the Australian Taxation Office fervently collects the revenue for the Federal Government to deliver the country’s services. There is a balancing act that needs to be mastered between maximising wealth and not falling foul of tax laws, both of which can have life-changing repercussions.

On the one hand, a well-considered, documented and implemented business structure— at any stage during the lifecycle of a business— can deliver and protect wealth to the business owners. So too can a well-considered exit or wind down strategy protect a business owner’s wealth accumulated during the life of the business.

On the other hand, the Federal Commissioner of Taxation (via the ATO) has broad powers to access taxpayer records, can impose steep penalties for incorrect amounts of tax paid, and routinely engages in litigation with taxpayers about assessments of tax and penalty payable.

Our experienced lawyers can guide you through the complexities of tax law as relevant to your business to explain what aspects of your business will be subject to the different Federal tax regimes, and help you deal with any investigation by or litigation against the ATO about the amount of tax properly payable.

What we do

Take the time to properly understand the facts, evidence and surrounding circumstances of your situation to analyse which Federal income tax regime applies and its effect.
Consider your legal position based on the current state of relevant law and, in collaboration with your other advisers (like accountants), determine the best strategy to protect your interests.
Consider the practical implications of tax on your business and on the other party to the transaction, in order to negotiate the best tax and commercial outcome for each of your proposed transactions.
Deliver advice in plain-English about your legal position, options for the next steps and our recommendations tailored to your situation and based on our expertise.
Prepare documents to implement any business structure, including restructure, and resolve accompanying estate planning issues.

Liaise and negotiate on your behalf with auditors from the ATO investigating your affairs.
Prepare objections to notices of assessment of tax and penalties.
Prepare proposals for payment arrangements and giving security for tax debts.
Prepare and run litigation for you challenging an objection decision about a notice of assessment.
Prepare and help you execute documents recording and giving effect to settlement reached with the ATO or court orders.

The mv difference

Experts in Federal, State and Territory tax regimes, working with property developers, accountants and multi-level corporate groups.
A commitment to protecting your interests having regard to both legal and non-legal interests.
A focus on practical and plain-English advice, with commercial recommendations to resolve issues.
A commitment to collaboration with your representatives and other advisers to determine and implement the best strategy to protect your interests and ensure your tax obligations are met.
True passion for this area of law.
Strong connections with Australia’s leading tax barristers.
Frank and fearless advice to you about the strength of your legal position, and the likely outcome of any dispute.
Full and frank disclosure of all legal costs to ensure a properly informed decision about the next steps is made, and there are no unhappy legal costs surprises along the way.

FAQs

What is a director penalty notice?

A director penalty notice (DPN) is a notice of assessment issued to a company director for a penalty equal to the amount of certain unpaid amounts owed by the company, particularly superannuation guarantee charge (SGC) and pay-as-you-go-withholding (PAYGW). The practical effect of a DPN is to pierce the corporate veil and make a company director personally liable for a tax debt owed by their company.

There are two types of DPNs:

non-lockdown DPNs — issued to company directors that have lodged the company’s business activity statement (BAS) or instalment activity statement (IAS) — ie reported the company’s tax obligations — but the PAYGW and / or SGC debt remains unpaid; and
lockdown DPNs — issued to company directors where the company has failed to lodge its BAS or IAS — ie not reported the company’s tax obligations — within three months of the relevant due date for lodgement.

The relevance of the type of DPN relates to remission of the penalty.

How do you deal with a DPN?

For a non-lockdown DPN, directors have 21 days in which to:

pay the tax liability (actual or estimated);
appoint (not just take steps to appoint) an administrator under the Corporations Act 2001 (Cth); or
appoint (not just apply or take steps to appoint) a liquidator under the Corporations Act,

before they become personally liable for the whole penalty amount.

For a lockdown DPN, directors have 21 days in which to pay the tax liability (actual or estimated). Appointing an administrator or liquidator will not save the directors from personal liability.

Are all directors caught under the DPN regime?

The DPN regime will apply to a person who was a director at the time the company was under a tax obligation and the liability for the obligation remains unpaid. The DPN regime will also apply to a person even if that person stopped being a director before the end of the due day.

The DPN regime applies to a ‘new director’, who is a person that became a director of the company when that company was under a tax obligation and the liability for that obligation remains unpaid 30 days later.

New directors have up to three months from their appointment to resign to avoid being liable under a lockdown DPN.

Are there any defences to a DPN?

A director will not be liable to a penalty if:

because of illness or some other good reason, it would have been unreasonable to expect the director to take part, and the director did not take part, in the management of the company;
the director took all reasonable steps to ensure that one of the following happened:
- the company paid the outstanding amount;
- an administrator was appointed to the company; or
- a liquidator was appointed to the company;
there were no reasonable steps the director could have taken to ensure any of the things in listed immediately above could have happened; or
in the case of an unpaid SGC liability, the company treated the relevant superannuation legislation as applying in a way that could be reasonably argued was in accordance with the law and took reasonable care in applying that legislation.

In determining what are reasonable steps, the Commissioner has regard to:

when, and for how long, the director was a director and took part in the management of the company; and
all other relevant circumstances.

How do you dispute a tax debt?

If you disagree with a decision or assessment the Commissioner (via the ATO) has made about your tax, you have the right to have the decision reviewed. You can also request an informal internal review by the ATO.

You can formally object to the decision or assessment under the process set out in relevant tax-administration legislation. Then, if you do not agree with the objection decision, you can appeal that decision to the Administrative Appeals Tribunal or Federal Court of Australia.

Do you have to pay a disputed tax debt?

Yes, all tax debts assessed by the Commissioner (via the ATO) are payable, even disputed debts.

Where tax is paid and the dispute is resolved in favour of the taxpayer (in whole or in part), the Commissioner will pay interest on overpayments in respect of certain types of tax which have been overpaid.

At the objection stage, you are expected to properly cooperate with the ATO objections officer by promptly responding to queries and providing additional material as sought.

If the Commissioner perceives you have lodged a frivolous objection, or are deliberately delaying the objection process, or there is some other risk to the revenue, then debt recovery action against you will be commenced.

At review or appeal stage (ie reviewing or appealing an objection decision), the Commissioner will seek to enforce collection of any unpaid disputed debt unless a formal deferral of recovery action has been granted to you. The Commissioner may agree to deferral of recovery action where:

you have entered into a 50 / 50 payment arrangement and the deferred tax amount is not at risk;
the Commissioner considers there is a genuine dispute about the debt; or
in the dispute, the Commissioner’s argument is contrary to previous ATO advice or case law.

What happens if you do not pay a disputed tax debt on time?

The Commissioner (via the ATO) may initiate recovery action for collection of unpaid disputed debts at any time, even before determining an objection, based on an analysis of the risk associated with the case. This risk analysis continues during the various stages of the dispute resolution process while a debt remains unpaid.

Some of the ways in which the Commissioner can recover an unpaid tax debt include:

using refunds or credits you are owed in respect of other Federal tax regimes;
using an external debt collection agency to deal with you;
issuing a garnishee notice;
issuing a director penalty notice;
issuing a creditors statutory demand under the Corporations Act 2001 (Cth);
issuing a court claim;
issuing a bankruptcy notice and seeking a sequestration order by a court against an individual under the Bankruptcy Act 1966 (Cth);
seeking winding up orders by a court against a company.