Directors Penalty Notices

These Notices are issued by the ATO and, in some instances, by the Office of State Revenue in relation to GST group tax on the one hand, and payroll tax on the other. The letter generally sets out that the Director of the taxpayer company has four options:

• to pay the outstanding tax;
• to come to an arrangement (being a formal arrangement in writing) to pay the tax;
• to appoint an administrator; or
• to appoint a liquidator.

The Notices normally require that one of these steps be taken within 14 days, failing which, the Director becomes personally liable for the company’s tax debt.

As to how the 14 days are calculated, the time for postage and delivery is factored in

ATO Garnishees

If a client indicates that his/her business or his/her company’s business is indebted to the Tax Office, whilst on the one hand one must cooperate with the authorities to the extent necessary, you should caution the client about disclosing details of the company’s debtors to the Tax Office before making any decisions about reconstruction of the company via a Deed of Company Arrangement or otherwise.

The Tax Office can direct the company debtors to pay any money otherwise due to the company to the Tax Office. Which is generally the death of the company with no chance of reconstruction.

Asset protection

CHARGES

• Taking charges when directors advance or guarantee advances to a company
• Taking assignment of a bank charge when a director or shareholder pays out the bank? Wit or without an assignment the director or shareholder paying the bank is entitled to the security with the Bank had by virtue of subrogation.
• Subrogation  is the substitution of one party for another in the enforcement of rights against a third party for the substituted party's benefit: Orakpo v Manson Investments Ltd [1978] AC 95 ; [1977] 3 All ER 1 . The substitution occurs without any assignment by, or even assent of, the party from whom the rights are transferred. The doctrine applies in a range of circumstances, for example when a surety pays the creditor of a principal debtor, or when an insurer, under a contract of indemnity insurance, pays the insured who has rights against a third party.