Orange is the new blue. Beware!

If you or your client have received an Orange Notice from the Australian Taxation Office (ATO) with orange highlights and a heading that reads “Warning of possible Director Penalty Notice (DPN) for an unpaid company debt”, you must not ignore it.

Companies with unpaid tax liabilities or outstanding lodgements, must act now or face the risk of directors becoming personally liable to pay the company’s tax debts.

The pandemic-induced ATO honeymoon period is over. In excess of 52,000 notices have recently been issued to businesses with outstanding taxes or returns. The ATO is giving noncompliant businesses a hard warning to communicate with them to ensure that tax debts are reported and a plan is in place to pay outstanding amounts.

The “Orange Notice” signifies the ATO’s shift to collection mode. This means it is imperative that directors make it a priority to lodge Company returns promptly or risk being personally liable for tax debts such as PAYG withholding, Superannuation Guarantee Charges, and GST under a “lockdown” Director Penalty Notice. It is essential for anyone in receipt of an Orange Notice to seek out urgent advice and act quickly.

In a media release issued by the ATO in May 2022, it advised that it was issuing 30 to 40 DPNs each day and it was expecting that number to increase. It is clear that the ATO will no longer tolerate inaction, silence, or non-payment.

Disclosure of business tax debts

The ATO has also issued in excess of 29,500 awareness letters for disclosure of business tax debts. If you or your client has received this awareness letter, the ATO may disclose you or your client's tax debts to the Credit Reporting Bureaus (“CRBs”).

The media release issued by the ATO in May 2022 discloses the ATO has issued nearly 300 intent to disclose notices and has commenced disclosing some of these to CRBs. If you or your client have received letters from the ATO with regards to these disclosures, seek out urgent advice and act quickly.

How to avoid recovery actions

The ATO advised that the key steps to avoiding recovery action are:

1. Lodge future tax obligations on time, even if you do not have the financial capacity to pay the tax liability.
2. Inform them if you or your business cannot pay on time, contact the ATO to seek assistance. The ATO can place you on a payment plan, provide additional time to lodge future tax obligations, or provide remissions of interest and penalties.
3. Do not ignore any correspondence you receive from the ATO in relation to your debts, including reminders, payment demands, or Director Penalty Notices.

PKF is here to help

If you are a director of a company or an adviser who has a client who is concerned about their ability to deal with accrued tax debts, please contact our Business Recovery and Insolvency Team at PKF to talk about options. We can provide the expert help you need to stay safe from a debt virus.