Friday, November 8, 2024

The ATO is cracking down on former company directors in a blitz some say will send them bankrupt

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A day after his 52nd birthday, Andrew Christodoulou got a nasty surprise in the mail.

A letter from the Australian Taxation Office (ATO) in November last year read: “You have been issued with a director penalty notice for Superannuation Guarantee Charge amounts”.

“A director’s penalty notice. I’ve never heard of one,” Mr Christodoulou tells ABC News.

“It rocks up on the doorstep. And my wife opens it with the rest of the mail. And it essentially says in no fewer words that you owe $437,000. You have 21 days to pay it.”

He’s thinking, ‘it must be a mistake’. 

“How the hell could I owe $437,000 — it is more than my mortgage,” he says.

The ATO is alleging the company that Mr Christodoulou ran for 22 years, which went into voluntary administration in 2016 and shut down three years later, owes superannuation to workers it employed at the time.

Some of the alleged debts date back to April 2013 while Mr Christodoulou was a director of the security firm, Kudos Australasia.

Andrew Christodoulou thought the ATO had made a mistake when he got the Director Penalty Notice saying he owed $437,000. (ABC News: Craig Andrews)

Company directors are responsible for ensuring that the company’s tax and super obligations are reported and paid on time.

If the company does not pay certain liabilities by the due date, the ATO can recover these amounts from the director personally, and do it after the fact, going after them as a former company director.

Through the pandemic, these powers were rarely used. 

But after years of going easy, the tax office is back and it’s going hard to recoup tax and super debts it says current and former directors owe.

The federal government is also backing the ATO. 

It has instructed the tax office to chase more than $34 billion worth of debt owed by small businesses and self-employed Australians, many of which were put on hold during COVID.

The agency is issuing more director penalty notices, as well as garnishee notices, which allow it to take money directly from a person’s bank account or employer.

This stronger action is pushing businesses into making the call to go into insolvency or face being forcibly wound up by the ATO.

It’s a big reason why calls to debt helplines have skyrocketed and the rate of insolvencies is now tracking around peaks seen just after the global financial crisis.

‘No clarification’

As he works to resolve the dispute, Mr Christodoulou says legal fees are piling up, and he fears the ATO may personally bankrupt him.

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