Toby’s story – ATO prosecution & a big tax debt

The ATO served Toby with a Complaint and Summons in early 2017.

He was being prosecuted for not lodging 12 income tax returns and 41 Business Activity Statements.

He went to Court on the day listed on the Complaint on his own. It was stressful for him. The Magistrate gave him an adjournment so that he could get legal advice.

Toby searched online and found the Hartigan Law website. He called and we arranged a time to meet.

During our first meeting, I looked at the Complaint and Summons. I calculated his maximum potential penalty for all these charges – it was around $280,000. It was serious.

We also talked about what would happen once he lodged his returns. He would have a tax debt and the ATO would charge him interest on the unpaid tax.

We talked about his strategy.

I have represented many clients charged under section 8C of the Taxation Administration Act 1953. I know what to look for and how to help. I specialise in tax and know how the tax laws work. This is essential when dealing with charges like these.

The first thing was to get his tax returns lodged. I introduced him to an accountant who could help him to lodge his returns quickly.

Hot tip.

It is important to lodge your returns as soon as possible when you’re prosecuted for not lodging tax returns. This is a factor that the Magistrate will consider when deciding how much the penalty should be. 

Because I deal with these charges fairly often, there are a number of strategies that I have used to get charges withdrawn. I was able to draw on this experience for Toby.

I instantly recognised something about his situation that meant he was likely to have some of his charges withdrawn. I’d had similar cases before.

Before the whole thing was over, I was able to arrange for the ATO to drop over 75% of the charges.

Things were already looking better.

When we went to Court, Toby entered a guilty plea to the remaining 12 charges. I made detailed submissions to the Magistrate about Toby’s situation. There are laws about what the Magistrate needs to consider when deciding a penalty. There are also other cases which guide the Magistrate when making a decision.

I based my submissions on these laws and cases. I told the Magistrate exactly what he needed to know so that he could decide the penalty. I explained why he deserved leniency.

The Magistrate imposed a fine of $8,000 and ordered Toby to pay the ATO’s costs of around $400. This was a pretty good result – it was on the lower end of the usual fine in these sorts of cases. Remember the maximum potential penalty was around $280,000 for the 53 charges brought against him originally.

Unfortunately, that wasn’t the end of Toby’s tax issues.

He had a tax debt of around $79,000 after lodging his tax returns. About $47,000 of this was the general interest charge, which the ATO imposes for late payments. Toby didn’t have this kind of money lying around. He needed a plan for how he could pay this. Otherwise, he would never know when the ATO would take debt collection steps against him.

The first thing I was able to negotiate was a payment plan. With this in place, the ATO wouldn’t take any action against Toby (as long as he was making the payments).

I speak to the ATO on a daily basis. I know the calls can be frustrating – but I have years of experience in negotiating on behalf of my clients. I’m good at it and I get good results.

The ATO agreed to a 6-month payment plan of $800 a month. I agreed that I would call back at the end of the 6 months to arrange another plan. This would give Toby some breathing room to work out what to do with the rest of the debt.

But it didn’t end there.

I also prepared a letter to the ATO to attempt to get the general interest charge of around $47,000 to be remitted.

Having dealt with a number of these matters over the years, I was able to make the letter very clear and detailed. It addressed all of the things that the ATO has to consider when deciding whether to remit interest.

It was really important that this letter was just right. The ATO doesn’t just remit the interest without good reason, especially when they have already prosecuted the taxpayer for not lodging their returns. This is where my years of experience in writing these letters came in handy.

My wins.

In 2017 alone, I obtained remissions of around $1.5 million for my clients.

The ATO agreed to remit the interest. The general interest charge of around $47,000 was wiped off Toby’s tax debt. He was thrilled.

Once the 6-month payment plan was over, it was time to renegotiate the payment plan.

By this stage, there was only around $28,000 of the tax debt left to pay. Usually, the ATO would agree to this being paid off over 24 months – so, around $1,200 a month.

Unfortunately, Toby’s work had slowed down a lot. He’d lost a major contract in the last few months and was trying to win more work. He didn’t have enough income to commit to $1,200 per month.

After a few phone calls to the ATO, I was able to get him into another short-term arrangement. It took some effort and careful negotiation on my part, but we got there. He now has another 6 months of lower payments to make before we need to negotiate something more long term.

Now he has time to find more work without being stressed about the tax debt. He knows that as long as he makes his payments, the ATO won’t take any debt recovery action against him or report his tax debt to a credit reporting agency.

Toby’s case is a pretty typical situation. If you haven’t lodged your returns for a while, the ATO can prosecute you. The penalties can be serious. It’s worth getting the right advice. If Toby hadn’t, he wouldn’t have had over 75% of the charges withdrawn – and his court fine would have been a lot higher.

A word of warning.

The ATO don’t generally wait for you to be 12 years behind in your tax return lodgments. I have helped a client who was prosecuted for not lodging one year’s tax return – one single year.

Of course, once you lodge all of your returns, it’s pretty likely that you will have a tax debt. This should be dealt with. You don’t want to live in fear that another ATO court case is just around the corner. The ATO can, and does, take legal action for unpaid tax debt.

It’s better to be proactive about it and make a plan to pay your debt. I can help you with this – just like I helped Toby.

What Toby says about Hartigan Law

I believe Cat was honestly concerned with my case and well-being at the time. She got me though a very tough time in my life with fantastic results, I don’t know what would have happened without her expertise.  

Toby | a happy Hartigan Law client