Everything you need to know about avoiding and dealing with ATO debt issues

TRANSCRIPT

CFA010 Olga Koskie – How to stay on the right side of the ATO
===

What happens when the bank of the ATO changes its focus to debt collection? Do you have a slice of that $52 billion that’s accumulating 11.34% interest daily. The ATO is getting more and more sophisticated, both in terms of using AI to identify risks, as well as using tactics to motivate businesses to pay their tax.

Recently, they’ve added reporting tax defaults to credit school companies and have started engaging debt collecting companies. More than ever, it’s so important to understand your tax responsibilities and how to avoid problems. And how to handle any ATO issues that you might have. The days of sticking your head in the sand, over.

And that’s why I’m so pleased to be talking to Olga Koskie, who’s a specialist in helping business owners resolve issues with the tax office. Olga has a background in litigation and is a director of TaxAssure, who are a specialist in Taxation Debt Advisory Business. They help companies, directors and business owners that have outstanding tax debt that they need to manage with the Australian Tax Office.

JD: Welcome to the CriticalFewActions™s to improve your business podcast. I’m John Downes and I’m here to help you cut through the overwhelm and prioritize what matters most to improve your business. Let’s get started and discover the CriticalFewActions™ that have the biggest impact.

Olga, welcome. Thanks, John. It’s great to see you. So Olga, how did you get into the tax debt advisory game?

Olga: Um, so it was actually through meeting the founders of this, this business. I was previously a commercial litigator, um, with a history in insolvency and in helping people in relation to a number of different things.

Um, and when I met the founders and they described to me exactly what was happening and, and how we were able to help people, it really spoke to me Um, and I thought it was an amazing thing for, for my career and for me personally to move into, um, to be able to help people in this way that, that really need that help.

Um, and to be able to help them quite quickly as well. So in, in my old life as a commercial litigator, often we would be in court for up to two years, three years, sometimes in disputes. Whereas now what we’re able to do is genuinely help people often within a month or six weeks.

JD: Oh, fantastic. So tell me a little bit about the types of clients you typically deal with.

Are they all rampant tax evaders trying to scam people or are any of

Olga: them? Not at all. Um, it’s actually quite surprising. People every now and again, someone will say, but everyone should pay their tax. Um, and, and are you just helping people dodge their tax? Whereas actually it’s the complete opposite. Um, probably every one of our clients, something has happened.

That is completely unforeseen and often really, really sad circumstances. Um, and I suppose COVID has highlighted that for the whole world. Um, so COVID and even the war in Ukraine, you’ll have things like the boat getting stuck in the Suez canal. Um, but also a lot of the time there’s serious illnesses or there might be death or, um, a debtor hasn’t paid.

So there’s a series of terrible events that people don’t like to talk about. Um, that, that have led to a position of them being unable to pay their tax. Um, and the clients that come to us are not saying we don’t want to. They’re not saying we want to avoid the tax. They’re just saying we need some help and some time, um, to get back on track and we do want to pay our tax and we don’t want to avoid it, but right now we just can’t pay it all in full.

JD: Yeah, yeah. So can you walk me through a bit of an example and tell me what sort of happened?

Olga: Yeah, absolutely. Um, so a perfect example was that we had a tyre sales company. Um, and so over, over the period of COVID and also more recently this year, Yeah, they’ve had huge staff shortages. Um, and also there’s been issues if, if someone got sick, so there was isolation rules, they had the, the locked, the effect of lockdown.

And then they’ve also had a shortage of supplies of stock with importation delays. And so they got behind. So what their normal sales would be, or if they’re paying for stock and then there’s a delay of stock to come. They got severely behind in paying their tax. Um, and what happened was they got a director penalty notice, which can then make the director personally liable for the company’s debt.

Um, and so their accountant actually contacted us and asked whether we would be able to assist. They had tried to enter into a payment plan themselves. But because they had an outstanding lodgement that hadn’t been completed yet, um, and it was right before the end of financial year, so there was a lot going on for everyone, um, and they needed some assistance to get into the payment plan whilst their accountant completed the lodgement and to prevent further action happening.

Um, and so we actually were able to achieve that result for them within two weeks, which was pretty amazing. Um, and, and on, on their file as well, they had also incurred interest and penalties. So if you’re late, even a day late paying your tax, it incurs interest and penalties. Um, and, and that is, um, compounded daily.

So it adds up very quickly.

JD: It’s just over 8%.

Olga: Yeah, it’s just over 8 percent at the moment, um, compounded daily. So we were able to, um, get remission. So get written off for them 70, 000 off, off their entire debt and get them into a payment plan. and stop any further action. Um, and so that’s an amazing result for the client.

Um, and, and the payment plans that we look at getting people into and that we do get people into are ones they can afford. So not ones that, that the ATO might specifically say, you must pay this, um, but it matches their cashflow. It matches where their business is at. In this point in time, um, and where they believe the business is going to go.

So it doesn’t put more pressure on the business. It actually takes that pressure off, um, takes that weight off the owner’s shoulders often so they can get on with running their business.

JD: Wow. That sounds really positive. I suspect they don’t all go that well. Can you tell me about one which went totally pear shaped?

Olga: Um, so the majority do, um, go well. Um, I’m not, I’m not good at taking no for an answer.

JD: So the majority go well. The

Olga: majority go well. Um, and most of the time when people come to us, and I suppose that’s a big difference is that we are here to get them back on track and, and to help them. So, so it’s not necessarily a funnel.

Um, we don’t we don’t funnel towards liquidation. Um, we are specifically there if, if you want to pay your tax. Even though you might not be happy about it, but you need help. That’s where we come in. Um, so I suppose the only times where things might go slightly pear shaped is Is if we’ve worked with businesses often, we will still work with businesses for a period of time with larger debt.

If they’re trying to get back on track and a number of applications and needed for these payment plans and sometimes over a period of time, another unfortunate circumstance might arrive and and at the end of sort of. a year or two years when we’ve had payment plans for them, but another event arises, they decide that the business is no longer viable.

Um, but that would probably be the only situation where something would actually go pear shaped. Um, most of the time, the absolute majority of the time, we will continue to work with the business, work with the ATO and negotiate a suitable outcome that the business can afford and that gets them back into a position of compliance.

JD: Right. So, given what you just said, I guess there’s a couple of questions that sort of come to mind for me. So, if I’m a CEO and for whatever reason, I find myself in a spot of bother, if the ATO hasn’t contacted me, should I just wait for them to call me?

Olga: No.

JD: Um,

Olga: even, even though that is, that is the most appealing option and I get it like it’s super stressful.

Why would you contact someone if they haven’t rung you and asked you for money? Um, but there’s a whole heap of reasons. Behind the scenes, what happens is if you are non compliant and if you haven’t lodged or you haven’t paid, there’s things, what’s called risk ratings and also different levels within the ATO, um, of the debt department.

in which you get flagged. And so even though the ATO may not be banging down your door as such yet or sending you letters or calling you, they still know. They know if non lodgements haven’t happened. They know if you owe them money. And if, if you wait for them to contact you, you have a higher risk rating and it’s much harder.

Whereas if you’re proactive and getting the right help, then you can actually get better plans, more affordable, um, and, and in some ways it’s less work for us. So we, we can still help you. There, there is no doubt about that. However, it is absolutely, um, much, much better if you’re proactive.

JD: And so, so if they have contacted me, should I just stick my head in the sand?

Olga: No. Um, and I suppose following on from your last question as well, there’s also the potential, as we just mentioned before, about directors becoming personally liable for company debt. What does

JD: that mean?

Olga: So in, in some situations, a company’s GST. P A Y G and super debt. The director can be personally liable for so many people think, Oh, well, it’s just my company.

It doesn’t really matter. If all goes bad, then I can liquidate my company. But there are there are quite sort of strict legal boundaries and requirements around all of them. And what can happen is the ATO can send a Director Penalty Notice. Um, we’ve seen at the moment the ATO is sending 120 out a day of Director Penalty Notices that are making directors personally liable.

Whereas a company gets on the front foot, gets back into a position of compliance, then you can avoid that personal liability. Um, I think the other thing to note here, too, is that there are options and there are solutions, um, and often people think around the ignoring and the head in the sand is two options.

Ignore it completely or pay it in full. And if you can’t pay it in full, you just have to ignore it. But that’s not the case at all. But I think a lot of owners, um, In times of stress. And as you said, CEOs of companies feel that they are the only two options where there’s not, there’s an absolute mirror of options in between to help the company get back into a position of compliance.

Um, And, and compliance is not payment in full. This is another thing I suppose that’s super important as well, um, for companies to understand, is compliance is being in a payment plan that’s been agreed to by the ATO, that you pay every month, and you pay your ongoings. Compliance doesn’t mean you don’t have any debt.

It’s okay to have debt. As long as it’s in a compliant

JD: plan. Okay, so, so getting yourself into a plan that allows you to, that allows you to meet your obligations within your cash flow. Is really what’s going to actually help you maintain a successful business or at least a sustainable business. Um, and, and manage down your risk profile within the ATO.

Can the, can your ATO debt penalties and interest actually be reduced? Is that something that the ATO has got the authority to do or is it locked and loaded?

Olga: Yeah, absolutely. So, so there’s what’s called legal practice requirements that the ATR allow to take into consideration, um, when looking at the interest and penalties.

So many people that we help, the interest and penalties can be almost half the amount of the total debt. Um, And, and some people say, just do a deal. Can you just do a deal? Just, you know, say that, you know, I’ll pay, I’ll pay a hundred and can they wipe the other hundred? Um, but it doesn’t actually work that way.

An application needs to be put to the ATO with all of the requirements as to why they should get rid of that. Um, and that’s a big part of what we do is helping people reduce the debt. And reducing it at the, at the beginning where possible, which can then lower the, the ongoing payments and lower the ongoing liability as well.

JD: And just on that, once you’re into a payment plan, do the penalties and interest continue to accrue at compounded rates?

Olga: Um, penalties shouldn’t because the penalties are for late lodgements. So if you, if you lodged late or paid late after you’re in a plan that would actually default the plan. Um, the pen, the interest does continue to accrue, um, once you are in a plan, but again, if At the end of that plan, we can come back in and help you get rid of that, um, if there are the right circumstances and the right, um, requirements and needs.

JD: Okay. And so, so if we don’t, uh, if we don’t engage in, in, Intelligent and proactive negotiations with the ATO and, uh, and basically, um, help them understand that we are committed to actually paying our debts. What recovery action can the ATO actually take?

Olga: Um, so there is a lot and I sort of, I feel like people are in a little bit of a false sense of security after the last two years.

The last two years were not normal. All of the recovery action was on hold. Um, and it’s the same as the, the banks almost not, not enforcing the payment of mortgage and some of the, the lease holidays, so to speak, that landlords gave. Whereas in, in normal times, so, so pre COVID and what we’re seeing now, um, one of the recovery actions is direct to penalty notices, which we just spoke about.

JD: And that’s where actually the director’s personally liable. And so their house cars and all their own assets are actually on the line.

Olga: 100%. That’s exactly what that means. And if that’s ignored and the ATO continue with that personal recovery action, that can lead to bankruptcy of an individual. Um, other recovery action can include what’s called statutory demands and then wind up actions for company debt.

Which can then lead to winding a company up. Um, there’s also garnishee notices. So they can, they can send out a garnishee notice without a judgment. So it’s sort of very different to anyone else you might owe money to. And they can garnishee then a creditor that owes you money before it gets to you.

They can sometimes put garnishee notice on EFTPOS machines. We’ve seen them on bank accounts. We’ve seen them on creditors, um, which can then dramatically, um, impact your cash flow because they’re taking a percentage before it gets to you. Um, and a new power that’s recently come in is if you have a debt that’s more than $100, 000 and there’s more than 90 days old, the ATO can report both sole traders and companies to credit reporting agencies.

So that can then affect your external credit, um, rating if you’re trying to get a personal loan, a house loan, a company loan, asset finance, whatever that source of income or that loan is, that reporting will affect that. Um, so there’s very serious consequences to ignoring the debt, um, and, and the key, absolute key is to deal with it before it gets out.

Yeah.

JD: Yeah. Because the reality is that you just can’t hide.

Olga: No, no, no, no hiding at all.

Are you looking to pinpoint the areas that will make the biggest impact on your business? Check out the Organization Performance and Value Diagnostic. This powerful tool lets you evaluate your business on multiple facets and provides email reminders to keep you on track. Head over to www.CriticalFewActions.com.Au and get started now.

JD: Okay. And so, so I don’t know if you’ve come across it, but I’ve certainly received the recorded message on my, my, um, my voicemail from spam is saying that, um, that they represent the Australian tax office, that I’ve got an outstanding debt and that I’ve, um, there’s a warrant for my arrest and, um, and I’m going to go to jail unless of course I hand over my credit card details.

Uh, am I going to go to jail, uh, with the text in?

Olga: No, um, especially not from a scammer. Um, it’s pretty scary, I think, that, that people can send those sorts of messages and, and if there’s elderly people that get very scared by that. The ATO will never ask for a credit card details. Um, they, you, the payment plans don’t even work that way.

So no, they are not real. They need to be ignored. Um, but if anything, I suppose it’s a good reminder to speak to your advisor and go, okay, here’s everything. All my lodgements up to date. Have I got any outstanding debt? But no, I would never ever respond to someone asking for credit card details.

JD: Sure. And is the ATO going to send me to jail anyway?

Olga: No.

JD: Um, unless I think, I

Olga: suppose the, the only caveat, yeah, the only caveat on that, I think if, if there’s major fraud committed, but, but we won’t go down that road. If there was major fraud committed, you might be looking at something like that, but otherwise, no, not for death.

JD: Yeah. And, and you were saying that things have changed quite significantly over the last two, well, since the last two years, I guess, do you have any tips for businesses dealing with a, a post covid, a TO?

Olga: Um, absolutely. So it’s back to, to being, you need to be proactive and you, you can’t assume anymore that if you haven’t heard from them that there won’t be any further action. Um, the a TO are back to, and, and they’ve publicly stated this. What’s called active collection mode. Um, so it’s sort of back to business as usual.

Um, and the ATO are classifying COVID as they would any other natural disaster. Um, so like a bushfire or a flood, COVID is now considered the same as that. And there needs to be proactive engagement. Um, and it’s not enough to sort of just wave the COVID flag, um, and ask for some more time. It’s about using, um, The right help.

And I think that’s the biggest, the biggest thing is there are so many experts out there that, that are very niche in what they do. Um, and, and there are solutions and it’s getting the right people to help you and proactively engage with the ATO to get the right solution, both for your business and also for you personally, for the stress to, to deal with that, to be able to get on with running your business.

JD: Yeah. Yeah. And so I guess the other question that sort of comes to mind is, so. Um, most businesses, if not all, have got, got accountants. So why don’t I just get my accountant to do this? Isn’t that their job?

Olga: Um, so we often get asked that and, and my best analogy is if you smash your knee, um, and go to your GP and say, can you just fix my smashed knee?

They’re not going to try and do surgery on your knee. They’re going to send you to a specialist who, who fixes knees. all day, every day and only needs. Um, that’s us. So, so we deal with the debt team at the ATO all day, every day. So, so the, the accountant’s main job, I suppose, just you would say is compliance and regulatory and advice.

Um, and we don’t do any of those things. We don’t prepare your tax return. We don’t lodge your bass. We don’t give you tax advice. We don’t help with the compliance side of things. We only deal with the debt. Um, and so we’re absolute specialists in dealing with the debt and, and we know the debt team, we know the rules, we know the laws and the, the applications that we submit for both payment plans and also reducing the overall debt, uh, are quite detailed.

They’re often 10 pages long. Um, they are written submissions that go through the legal practice requirements. Um, and, and as we mentioned, um, we’re not a law firm, but we do all have. Law degrees and, and very different expertise and training in that area.

JD: Okay. And how do you charge for that sort of service?

Olga: Um, so we, we charge in three, the easiest way to describe it is three stages. So the first stage we do a review and that’s completely free. So that review tells us the amounts of the debt, the amounts of the interest, the risk rating that we just spoke about before, and a whole heap of other factors. Um, that review also tells me how much work is going to be involved.

in, in our applications and in our submissions to get the company back into a compliant payment plan. So the second phase is the, is the management of the debt and to get you back into a compliant payment plan and manage that and stop any further legal action, the things that we spoke about. And that’s an upfront fixed fee, no surprises, no time based, you know exactly how much it is.

before we, before we start work. Um, and at that point, if you don’t want to proceed, you keep our report. Thanks very much. Um, and, and, and that’s the end of it.

And

Olga: then the third stage is getting, is reducing the debt and getting rid of those interest and penalties. And that’s done on the success fee. So if we don’t get anything off for you, we don’t, we don’t charge you anything.

But if we do reduce your debt, when, when we’re successful in reducing that debt, it’s, it’s a percentage of what we, what we, um, reduce it by.

Right. Okay. That sounds pretty reasonable. It’s

Olga: very, very, very transparent, very, very upfront, um, which I think is fantastic for businesses.

JD: Well, I think it’s really imperative.

And particularly if you’re feeling a lot of stress at the time, um, it’d be easier for to feel or to be taken advantage of. And so, so that transparency, I think, is actually really heartening as well. You really need someone who knows what they’re doing to take you by the hand and, and, and guide you through this process.

Olga: Um, one other thing I think is, is useful when, when we talk about what we do is also mentioning what we don’t do. Um, so, so our sole goal is to keep the business alive if it’s a viable business.

So, so we’re not here to try and steer you into liquidation or steer you into bankruptcy or lend you money. We truly just want to help you in relation to your tax debt. To get it under control to take that stress away and almost be the middle person in between you and the ATO when it’s all too hard to deal with to get you the plan that you’re that you need and that your business needs the sun’s just come out.

Um, that’s exactly right that you need to get you back on track. So I think that’s a really important message and that there is help.

JD: Yeah. Yeah. Yeah. I think that’s absolutely imperative. So, Olga, if a, if a CEO is struggling with the ATO or sweating about whether they can meet their obligations, even if the ATO hasn’t approached them, what would be the #CriticalFewActions™ that they should do tomorrow, if not today?

Olga: Call me,

JD: but

Olga: I think they need to decide on getting some help. I think I think that would be absolutely critical. Um, even if they have tried to get into a payment plan, um, and, and got rejected or knocked back, that’s not a bar to being able to still get into a payment plan. So we’re still able to assist at that point.

Um, but I think all jokes aside, the most important thing is. is to tackle it. Um, some people talk about each day swallowing the frog, the thing that you don’t actually want to do. And, and that in the morning that that’s what needs to be done. And, and to put a couple of hours aside and go, okay, we need a plan of attack.

We need to work out who’s going to help us, um, and make a proactive decision that that’s what needs to happen. Yeah.

JD: Yeah. Like I, I think that that’s absolutely invaluable. Oh, look, thanks so much for your time and thoughts. I really appreciate it.

Olga: Thanks. Thanks, John.

TRANSCRIPT CFA010 Olga Koskie – How to right side of ATO.txt

Displaying TRANSCRIPT CFA010 Olga Koskie – How to right side of ATO.txt.