George’s story – almost made bankrupt by the ATO

In mid 2017, I got a phone call from George.

The ATO had filed a creditor’s petition. In other words, the ATO had applied to the Federal Court to make George bankrupt. He owed them over $220,000.

He had also started to receive aggressive phone calls from someone who knew about the ATO’s bankruptcy action. The man was telling him that the ATO was going to come and take everything from him. The man said that George needed to act quickly and appoint him to help him.

He says this guy just kept calling him – ‘when are you going to do the right thing and appoint me? You’re running out of time!’.

George thought this sounded a bit dodgy. He knew bankruptcy was serious, but he didn’t like this guy calling him out of the blue.

Aggressive debt rescue businesses monitor the bankruptcy applications and target potential bankrupts. It’s an aggressive sales tactic – and George was very wary of the calls.

He searched online to find out about ATO bankruptcies. He found me and decided he’d be more comfortable talking to me about it than his new mystery caller.

Our first meeting

George came in to meet me.

I asked him to bring all of the relevant documents – the bankruptcy notice, the creditor’s petition, copies of any letters to and from the ATO and a summary of his tax debt. I needed to review all of these to work out the best strategy to help George.

It was particularly important for me to know what kind of tax debt George had. This is because different tax debt is dealt with in different ways. The strategy would depend on the exact kinds of debts that George had.

Our first meeting took a while.

George explained to me what had happened. He’d had an accountant who had given him some questionable advice. The accountant had also been very late with lodging documents with the ATO. George now had a new accountant who was getting him back on track. Because of all of this, his tax debt had gotten on top of him.

He told me that after he had received the ATO’s Summons for the debt last year, his new accountant asked the ATO for a remission of all interest and penalties in an attempt to reduce the debt. The ATO refused this request. This made things a little bit more difficult – generally speaking, the ATO won’t reconsider a request for remission of interest and penalties. The law says that the only way to have it looked at again is to appeal to the Federal Court.

The strategy

In the end, the failed remission request didn’t matter. Because of all of my experience in dealing with tax debts, I was able to come up with a better plan.

Firstly, we had to ask the Federal Court for more time. We had to request an adjournment of the hearing of the Creditor’s Petition so that we could negotiate with the ATO about the debt.

I prepared the paperwork for the Federal Court.

A word of warning

You are not automatically entitled to an adjournment in a bankruptcy matter. There are careful steps you must take when asking for one. 

It’s best to get some good advice on this. If you get it wrong, you may not get the adjournment and you could be made bankrupt on the very first court date.

The next thing I did was to start negotiations with the ATO about how George would deal with his tax debt. I had to move quickly because I knew it would take the ATO a while to consider my proposals. This was where George had made the right decision in hiring me. There was no time for anyone to learn the ropes. He needed an expert who knew exactly what to do. That’s me.

I asked the ATO to release George from some of his tax debt. Not all kinds of tax debt can be released – but some can. There are very specific rules about when the ATO can release debts. The law says you only get one shot at this request. If the ATO say ‘no’, then you can only have it re-looked at by appealing to the Federal Court.

In George’s case, I had worked out that if the ATO could release him from all of his eligible tax debt, he would only have around $40,000 left to pay. I was able to work this out because I have years of experience in dealing with tax debts. I know how to read ATO account statements (which can be very difficult once the legal action starts!) and I know the law about what the ATO can and can’t release.

The request to the ATO to release George from some of his tax debt was very detailed. It had to be. We had a very short span of time to get this right. If I didn’t give the ATO the right information, they could refuse the application and George could end up bankrupt.

The result

Luckily I’m good at what I do. The ATO decided to release George from most of his tax debt, so long as he paid the ineligible amount of around $40,000 before the matter went back to Court.

It was a scramble for George, but he managed to make the payment before our Court date. I went back to Court, where the ATO asked the Registrar to dismiss the application because George no longer had a tax debt. The Court agreed – and that was that.

This was an excellent outcome for George and he was very relieved. He went from being on the brink of bankruptcy and receiving harassing phone calls from a persistent debt rescue business, to having his tax debt fully paid off.