ATO Debt Recovery – Part 2 – Estimate Notices

ESTIMATE NOTICES

Background:

  1. An Estimate is a formal notice that the ATO can issue under section 268-15 of Schedule 1 of the Taxation Administration Act 1953 (‘The Act’):
    • The ATO can issue an Estimate Notice if it believes that a business has overdue:
      • PAYG withholding amounts; or
      • SGC that has not been assessed; or
      • GST amounts under the GST Act;
    • The ATO can use its power to estimate PAYG withholding and SGC liabilities of creditors. This allows them to create debt under law and enabled them to start perusing the debt. Situations where the ATO can estimate liabilities include but are not limited to:
      • When the ATO has tried to audit a business but has not received compliance or help from the business owner; or
      • The ATO considers there to be phoenix activity.
    • The ATO will estimate the liability and has an unlimited scope of what they can consider. The only restriction on the estimate is that it must be reasonable. It is likely that the ATO will look at:
      • past PAYG withholding amounts or superannuation payments
      • bank records to investigate how staff have been paid
      • they may speak to employees about the amounts they have received.
    • If you are issued with an Estimate Notice, there is an additional administrative penalty that is 75% of your primary tax liability pursuant to subsection 284-75(3) of Schedule 1 of the Act if a false or misleading statement is made.

Statutory Declaration

  1. If you receive an Estimate Notice, you should also receive a statutory declaration template. You must complete this declaration if you wish to provide a declaration as why the estimate is wrong in the hopes that the ATO can reduce or revoke any of the estimates:
    • Very specific information may be required to be contained in a statutory declaration for an Estimate Notice. It is important to get advice from a tax expert when completing this statutory declaration:
      • For an estimate regarding PAYG withholding, the declaration must verify the following facts pursuant to section 268-90(2) of the Act:
        • The sum of all amounts you withheld under Division 12 during the relevant period, or the fact that you did not withhold any such amounts during the period;
        • The sum of all amounts you were required to pay under Division 13 during the relevant period, or the fact that you were not required to pay any such amounts during the period;
        • The sum of all amounts you were required to pay under Division 14 during the relevant period, or the fact that you were not required to pay any such amounts during the period; and
        • What has been done to comply with Division 16 in relation to these amounts;
      • For an estimate regarding SGC, the statutory declaration must verify the following facts pursuant to section 268-90(2A) of the Act:
        • Your name and address;
        • For each employee for whom you have an individual superannuation guarantee shortfall for the relevant quarter:
          • The employee’s name, postal address and the employees tax file number; and
          • The amount of shortfall; and
        • What has been done to comply with your obligation to pay the relevant superannuation guarantee charge to the Commissioner;
      • For an estimate regarding a liability in relation to net amount under the GST Act, the statutory declaration must verify the following facts pursuant to section 268-90(2B) of the Act:
        • Your net amount for the tax period;
        • What has been done to comply with Division 31 and 22 of the GST Act in relation to that tax period;
        • Your taxable supplies and credible acquisitions that are attributable to that tax period;
        • Your assessable dealings and wine tax credits that are attributable to that tax period
      • The statutory declaration should be returned to the ATO within 7 days of receiving the Estimate Notice;
      • The ATO will reduce or revoke the estimate in accordance with the statements in the statutory declaration if it:
        • Receives the statutory declaration in time;
        • Accepts the claims made in the declaration;
      • It must be noted that a statutory declaration is a formal legal document and there are significant consequences for making a false or misleading declaration.

Tips and Traps

  1. An Estimate should not be taken lightly, and if one is received you should act promptly. We recommend taking the following initiatives:
    • Update ASIC registry when required. Directors registered address will be where Estimate Notices are served. If the Estimate Notice is delivered to the wrong address, there will be significantly less time to lodge a statutory declaration as there is a 7-day time limit.
    • Ensure your Assets are protected by seeking professional advice on asset protection structures because:
      • Failing to pay an Estimate Notice will result in a lockdown DPN and will make a company director personally liable; and
      • The debt will need to be paid or the director will go bankrupt; and
    • Lodge a complaint with the ATO or the IGoT if you receive an Estimate Notice. This will not only allow you to dispute the notice but also postpones the process and gives you more time.
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