What happens when the tax office loses patience? Most business owners realise that the ATO can garnishee bank accounts

or issue penalty notices, but few understand that they also have the power to stop you from leaving the country. As the ATO

ramps up its Firmer Action Program, the consequences for non-engagement have never been higher.

In this episode, we examine the mechanisms the ATO uses to target recalcitrant taxpayers and why burying your head in the

sand is the most dangerous strategy you can adopt. We break down the reality of Departure Prohibition Orders and how the

tax office uses forensic intelligence to track illegal phoenix activity across multiple entities.

Whether you are facing a cash flow squeeze or simply want to understand the current enforcement landscape, this

conversation reveals why early engagement and formal restructuring are the only ways to protect your business and your

personal freedom.

What You Will Learn:

• Why the ATO is now using Departure Prohibition Orders to stop taxpayers at the border

• How the Firmer Action Program identifies and targets serial tax offenders

• What triggers a freezing order or a garnishee notice on your business accounts

• Why unpaid superannuation is a primary focus for ATO enforcement

• How the tax office uses forensic intelligence to detect illegal phoenixing

• What formal restructuring options are available to businesses in financial hardship

Notable Quotes:

• These parties who have received those have clearly not engaged with the ATO as they should.

• By them not acting and responding to the various letters and communication from the ATO, the ATO has only one thing

in mind, and that is, Well, why are you not responding? You must be hiding or doing something untoward.

• The ATO actually want to help small business, and there are various mechanisms through small business restructure

where the ATO are able to support the restructure of a business formally.

• The earlier in the stage of hardship that that happens, we quite find that the more likely it is that any restructuring activity

will be successful.

Key Takeaways:

• Engagement is the most critical factor in avoiding extreme ATO enforcement measures.

• The ATO acts as a model litigant and follows a specific process before escalating to travel bans.

• Ignoring SMS reminders and letters is interpreted as a sign of deliberate avoidance.

• Small Business Restructuring and Deeds of Company Arrangement are viable paths for businesses with historical debt.

• The ATO has the tools to track directors across different entities to stop illegal phoenix activity.

Insolvency

#ATO #TaxDebt #BusinessRestructure #SmallBusinessAU #FinancialHardship #Liquidation #TaxCompliance

Who Should Listen: Business owners, company directors, lawyers, accountants, and anyone wanting to understand financial distress warning signs.

About the Host:

Darren Vardy - Managing Director of Insolvency Options and Registered Liquidator with over 30 years of experience in business recovery and debt solutions. Darren has helped thousands of businesses and individuals navigate financial distress and find practical solutions to complex problems.

Connect With Us:

• Website: insolvencyoptions.com.au  • Phone: 1800 463 328 • LinkedIn: https://www.linkedin.com/in/darrenvardy/

Subscribe & Follow:

Don't miss future episodes! Subscribe to i.O. - Insolvency Options

Like this episode? Please leave a review and share with colleagues who might benefit from these insights.

Co-host: Anthony Perl

Produced by: Podcasts Done For You

When the ATO stops you at the border.

2

Welcome to IO Insolvency Options with

Darren Vardy, the managing director

3

of Insolvency Options and a registered

liquidator with over 30 years of

4

experience helping businesses and

individuals navigate financial challenges.

5

In today's episode, Darren explores

the ATO's Firmer Action Program and

6

reveals how serial tax offenders

can lose their right to travel.

7

He explains the critical importance

of proactive engagement to avoid

8

extreme enforcement measures.

9

You'll learn about departure prohibition

orders, the triggers for firmer ATO

10

action, and how to navigate financial

hardship through formal restructuring.

11

I'm your co-host Anthony Pearl.

12

Let's dive into unlocking

more about insolvency options.

13

Well, Darren, hello and welcome

to another episode of the podcast.

14

And I guess this is a really interesting

topic that we're gonna cover today,

15

all about the tax dodgers not being

allowed to use their passports.

16

I think that's probably an important

thing for people to know exists.

17

Darren: Look, yeah, it is.

18

It's a mechanism that's available to the

ATO where there are, for want of a better

19

term, serial offenders with non-payment

and/or reporting on taxation obligations.

20

Anthony Perl: Yeah, and it's interesting

that you say that it's open to them.

21

You kind of, I guess, as general

public, you almost think, like, "Well,

22

isn't there a point fairly quickly

where that should just be standard?"

23

Darren: The tax office needs to conduct

themselves as model litigants and as

24

a reasonable party in pursuing the

debts, and they have a program called

25

the Firmer Action Program, and that

deals with them pursuing outstanding

26

debts, non-lodgement, non-compliance

activities of business owners.

27

And there are a couple of things

for the ATO to get to that level

28

where they are issuing DPOs,

departure prohibition orders.

29

These parties who have received

those have clearly not engaged

30

with the ATO as they should.

31

And you know, this Firmer Action

Program, there are quite a number

32

of other steps that the ATO will go

through to try and elicit engagement

33

from the business owner, and generally

with their Firmer Action Program, it

34

occurs when, you know, the business

owner refuses to engage with the ATO.

35

They ignore any text messages, SMS

messages rather, or any reminder letters.

36

Where there's repeated default on

agreed payment plans is obviously

37

another trigger, and we find that

that's happening more often of late

38

with the cash flow squeeze that, that

small businesses are experiencing.

39

And the ATO are, are trying to

corral a business owner to a

40

position where they're actually

looking to resolve their financial

41

position and help manage their debt.

42

Another concern for the ATO is where,

when these business owners may have been

43

subject to an audit and it's been detected

that there's been deliberate avoidance

44

or ongoing payment avoidance continues.

45

Another thing is illegal

phoenix activities.

46

So the ATO has quite a, a number of

areas and issues that they concern

47

themselves with before they actually look

to enforce this firmer action program.

48

And before getting to, you know, a

departure prohibition order, what we're

49

finding is that the ATO will generally

have issued a garnishee notice, they may

50

have issued a director penalty notice,

and they also may have disclosed to

51

business, disclosed to credit reporting

bureaus the business' tax debt.

52

So generally, there's a lot of

early steps that have been taken by

53

the ATO for which hasn't resulted

in action by the business owner.

54

In addition to departure prohibition

orders, we've also seen directions to pay

55

superannuation guarantee charge, which is

the SGC, and which also falls under the

56

director penalty notice regime as well.

57

But we've also seen freezing orders, and

from time to time the ATO will in fact

58

approach the Supreme or Federal Court

for an order to temporarily prevent the

59

taxpayer or third parties from disposing

of any assets, you know, selling,

60

moving, or encumbering any assets where

there actually has been evidence of

61

avoidance of payment of the tax debt.

62

So this isn't something that

the tax office goes straight to.

63

They need to go through a process

to try and engage and try and have

64

the taxpayer come to the table

to deal with the financial issue.

65

But when they are, for want of a

better term, stonewalled, it leaves

66

them with very few options, and

quite often a departure prohibition

67

order, a freezing order, will

get the interest of the relevant

68

taxpayer to deal with their issues.

69

Anthony Perl: I mean, there must be

nothing worse than from an employee

70

point of view that you've got unpaid

superannuation, for example, and

71

your boss is off jointing overseas.

72

So you know, you can understand why

that kind of action is sometimes needed.

73

Darren: Absolutely.

74

You know, the employee superannuation

is part of a condition of employment.

75

It is afforded a priority under the

Corporations Act whereby from the

76

recovery of assets, generally employee

super is the first cab off the rank

77

That gets paid before annual leave,

long service leave, before redundancy.

78

So it, as well as any unpaid wages,

are afforded the top priority

79

for repayment out of the recovery

of assets in a liquidation.

80

And quite often, when a business

suffers financial hardship, those who

81

scream the most generally get paid,

and it's quite often the suppliers

82

that are knocking on the door.

83

But it's not the super funds

that render an invoice to seek

84

to get paid, and nor does the ATO

for their PAYG GST obligations.

85

So where it's a, for want of a better

term, a proactive obligation to pay

86

as opposed to someone pursuing the

payment, they quite often get shelved

87

to a later date for payment, and quite

often that later date may never arrive.

88

So what we're finding is that whilst

under the director penalty regime,

89

directors can be made personally

liable for outstanding super.

90

That has been a good mechanism to, for

directors to ensure that their super is

91

paid as best as possible and on time.

92

But what we also have coming into

93

change to the superannuation regime,

and it's what's called pay super.

94

Anthony Perl: I mean, I think before we

get into that, and I know we're going

95

to address that in a coming episode as

well, is walk me through the process,

96

though, for before the ATO actually gets

really to this point where they're saying,

97

"Right, we're stopping you at the border"

kind of deal, because it's not that many

98

in the grand scheme of things, is it?

99

I mean, it's not like there's

hundreds of people every week that

100

are having their passports taken away.

101

This is an end-course kind of

action where it's got quite serious.

102

Darren: And it is quite serious, and

as I indicated earlier, generally there

103

has been an elapse of a significant

amount of time for which the ATO has

104

attempted to contact the taxpayer.

105

They have been ignored.

106

Quite often, as you would expect, there is

a significant amount of money outstanding

107

that is being pursued, and it's where

there may be some evidence of the company

108

ceasing to trade, but a new company of a

similar name operating the same business

109

by the same directors is now in existence

and continuing to trade into the future.

110

And you are really dealing

with the recalcitrant taxpayer,

111

the worst of the worst.

112

And when we talk about the departure

prohibition orders, my experience in

113

having looked at those that have actually

been issued, there is a serious level

114

of non-compliance and a significant

debt outstanding for which also rolls

115

into the public interest issue or

public interest piece that the ATO must

116

act and uses the powers available to

issue the departure preservation orders

117

Anthony Perl: And I imagine, uh, Darren,

that this is the kind of space that you

118

find yourself in, you know, from your

point of view, that it's when things

119

get to this kind of desperate stage

sometimes that's when people act, whereas

120

they probably should've been acting a

lot earlier than this before it gets

121

to this point in time, and it's those

that are not doing anything that are

122

finding themselves in this situation.

123

Darren: Most definitely.

124

Most definitely.

125

But generally, this isn't the

mom-and-dad small business.

126

These taxpayers that are subject to such,

what we would say is such harsh action by

127

the ATO, I think whilst from the face of

it, it looks harsh, but given the conduct

128

and what the ATO has in fact gone through

previously, their action is justified.

129

Absolutely.

130

Anthony Perl: And then typically these

kinds of people are gonna be finding

131

themselves that where the company that

they were-- they had accrued this debt

132

on is insolvent, no longer trading.

133

Is that typically where you're

gonna find these people?

134

Darren: Absolutely.

135

And they may still be trading, but they

may not be trading in the entity that

136

has incurred the significant debt which

is outstanding, and that's where we get

137

in-- look at the illegal phoenixing.

138

And the ATO has a lot of intelligence

at their disposal to track directors,

139

track operations, track employees

through various entities to enable

140

them to determine what is going on

forensically to get to the position

141

of taking this extreme action.

142

Anthony Perl: And, you know, as

you kind of alluded to, I imagine

143

that many of these people in this

situation, it's not just the ATO

144

that they're probably money to.

145

So the ATO may be the

one that's taking action.

146

Where does that leave the other

people that may be owed money?

147

Darren: Well, generally the others

that are owed money end up being

148

creditors of the company that ultimately

goes into external administration.

149

And so d- does the ATO get priority

in those kinds of circumstances?

150

No, they don't.

151

The ATO is an unsecured creditor akin

to trade creditors and suppliers when a

152

company goes into external administration.

153

Anthony Perl: So I guess on the other

side of things, I'm just interested

154

as well that if for some reason

you're listening to this and you're

155

finding yourself in this situation

where things are accruing and...

156

Well, hopefully you've not received

one of these notices, 'cause I imagine

157

that if you get a notice like this

from the ATO, that you're probably

158

consulting a lawyer immediately.

159

But what is the course of action that

if they-- people are thinking they're

160

going down could end up in this path?

161

What should they be doing?

162

Darren: Yeah, look, the ATO Firmer Action

Program is all about taxpayer engagement.

163

So when you ask the question as to what

taxpayers should do, what business owners

164

should do, we look at the reasons why the

tax office take the action that they do.

165

And looking at that is taxpayers,

business owners, they should engage

166

and should proactively engage with

the ATO if they find that they're

167

in a financial hardship situation.

168

They shouldn't simply sit back and, with

all due respect, bury their head in the

169

sand and not respond to reminder letters.

170

Because by them not acting and

responding to the various letters and

171

communication from the ATO, the ATO

has only one thing in mind, and that

172

is, "Well, why are you not responding?

173

You must be hiding or

doing something untoward."

174

So it's always better to be proactive

with the ATO, explain the financial

175

position, and believe it or not, the ATO

actually want to help small business.

176

And there are various mechanisms through

small business restructure, through a

177

voluntary administration and deed of

company arrangement where the ATO are able

178

to support the restructure of a business

formally, and they will be relying upon

179

that to occur for, for the support.

180

But it all starts with

engagement and communication.

181

Anthony Perl: Yeah, I think

communication is the key here, isn't it?

182

Because as you called it,

burying your head in the sand,

183

you're in for a lot of pain.

184

And it's interesting what you say about

the ATO wanting to work with them as well.

185

I mean, I think that's an

important point, isn't it?

186

That it's better to stick your hand

up earlier on in the piece and see

187

if you can come to some sort of an

arrangement rather than just hoping.

188

Darren: Correct.

189

Correct.

190

And we've spoken about this previously,

where the first thing is the taxpayer,

191

the business owner, acknowledging

that they've got an issue and

192

then seeking out the right advice.

193

And generally, the company's external

accountant is the first port of call, or

194

their lawyer is the first port of call.

195

And it's from there where referrals to a

specialist insolvency practitioner occurs.

196

And the earlier that happens, or

the earlier in the stage of hardship

197

that that happens, we quite find

that the more likely it is that

198

any restructuring activity will be

successful because you have engagement

199

with the various stakeholders for

that turnaround and/or restructure.

200

So when matters are left for a period

of time and the ATO is in advanced

201

stages of their firmer action program

in attempts to recover the debt,

202

that's when the likelihood of them

supporting the business becomes far less.

203

Anthony Perl: And just to wrap up this

discussion, Darren, I'm just wanting

204

to ask, I mean, this kind of course

of action, is it a sign that the ATO

205

is trying to be a little bit stronger,

probably I would say post-COVID, when

206

there was some leniency over a period

of time, particularly to small business?

207

Is this part of them toughening things

up and trying to really make sure

208

that people are doing the right thing?

209

Darren: I think what it is, it's

when we talk COVID, you know, COVID

210

was an unprecedented era of our

time, and the implementation of

211

the programs during COVID required

businesses con- to continue to trade.

212

It, they required the business owners

receiving the funds and paying them out

213

to the employees in the ordinary course.

214

Businesses were used as a mechanism

to get money to the people, to those

215

who needed it, to support the economy.

216

That's what it was for now.

217

But for COVID, there was probably

quite a number of businesses that

218

were on the threshold of hardship

at the time COVID came around.

219

And during the COVID period, they

probably only maintained operations

220

to enable the facilitation of getting

money to the people that needed it.

221

What we're finding is that a lot of

business owners have come out of the COVID

222

period with a not dissimilar debt that

existed at the time that COVID came about.

223

But because of the COVID era, pandemic

era, they never had ability to deal

224

with how we fix the financial position

of our business to move forward.

225

You know, we're now a number of years

post-COVID, and what we're finding is

226

that some people have successfully managed

to get back on top of their liabilities

227

and get their businesses working again.

228

Others have managed to maintain

a same level, but not make any

229

indent into the historical debt

that was there, and others have...

230

are in a situation where the debt has in

fact increased and continue to accrue.

231

So they're the sort of three

types of businesses that

232

we're seeing at the moment.

233

And those where the debt hasn't increased,

where they've managed to maintain, you

234

know, we're finding that they're the

ones that have the ability to restructure

235

their operations to save some cost,

to- really quarantine that old debt

236

and restructure that to move forward.

237

Whereas those that are continuing to

operate, continuing to accrue debt,

238

we're finding that they are the ones

are ultimately ending up going into

239

liquidation with no recovery at all.

240

Anthony Perl: And that's all we have time

for in this episode, but next time on

241

IO: Insolvency Options, we're going to

be sounding the alarm for small business

242

owners as we look at the massive changes

coming to payroll and superannuation.

243

Darren's going to break down the impact

of these new regulations starting the 1st

244

of July and explain why these shifts could

lead more businesses to face financial

245

hardship if they aren't prepared.

246

It's definitely a critical conversation

that you can't afford to miss,

247

so make sure you're subscribed.

248

To help you navigate the topics

we discussed today, of course,

249

we have a workbook that's

available based on the episode.

250

It includes a number of questions that

you can answer, as well as key quotes

251

and an action plan to assist you.

252

You can download your copy via

the link in the show notes.

253

For details on how to get in touch

with Darren and his team on insolvency

254

challenges, please consult the show notes.

255

The podcast is produced by my

team at podcastdoneforyou.com.au,

256

helping professionals share

their expertise through

257

powerful podcast content.

258

If you found value in today's

episode, please like, comment, share,

259

and subscribe so you never miss an

episode of IO: Insolvency Options.

260

Until next time, remember, there's always

a way forward when you know your options.