Enter into an Instalment Arrangment to Pay the Debt
Entering an instalment repayment arrangment with the ATO appears a perfectly reasonable course of action in the face of receiving a Director Penalty Notice.
However the director(s), as with paying the debt in full, must recognise that if the company is placed into Liquidation, the liquidators will look to clawback unfair preferences.
Again, payments made by a company following the issue of a Director Penalty Ntoice will be considered preferential and potentially able to be clawed back.
If the liquidator takes action to recover such payments made to the tax office, the ATO can and will, seek the reimbursement of any moneys they are forced to disgorge from the directors personally.
This means your personal assets are at risk.
Accordingly, as repaying a tax debt by instalments can rebound on the director(s) personally, it is essential that before any payments are made under a Director Penalty Notice, the directors determine with a high level of confidence, that their company will remain solvent for the foreseeable future.
In addition, directors must note that, in circumstances where a repayment arrangment is appropriate, the agreement is finalised and in place before the expiry of the 14 day period allowed by the Director Penalty Notice. Merely commencing negotiations with the ATO within the 14 day period is not enough and may result in personal liability for the director(s).
