COVID-19: A Financial Health Perspective

March 17, 2020 Roger Blow

These are clearly concerning times from a global health perspective and entire nations are facing, in many cases for the first time in over half a decade, a genuine risk to the lives of their immediate family and close friends.

We are all receiving detailed advice and information many times a day about slowing or avoiding the spread of the virus. Indeed we risk missing the most important guidance by having to wade through so many updates and briefings on what we should and shouldn’t be doing!

But in addition to the obvious need to protect the health of our own families and the community as a whole, there is also a need to have at least some regard for other realities which, whilst not the current priority or focus, are still going to be relevant when we emerge from this crisis: jobs, income, tax liabilities, cash flow, finance, insurance, insolvency.

All of the information and signs suggest that this will be a long battle and not something that is a mere memory come Easter. The initial medical predictions put the peak of WA’s coronavirus attack most likely falling between June and August.

So as hard as it may be when every update is focused on social distancing and using antibac gel, we do also need at this time to start thinking about how we make or change plans to address the financial needs of our businesses and community. Already some industries would have been severely impacted financially by the virus measures, such as those in the events and sport sectors. Next in line will be restaurants and bars and then businesses selling luxury items or social experiences, given that belts will be tightened probably even more so than in the GFC. And we are only weeks into this story, with likely months still to go.

At Cove Legal we have specialized for many years in assisting clients with legal disputes or problems focused around either insolvency issues or outstanding tax liabilities. The advice in that space, virus or no virus, is to have the conversations early – especially where the ATO is concerned. So many damaging financial outcomes can be either avoided or lessened with early advice, action and intervention when things start to look financially uncomfortable.

We provide guidance on potential personal liability for Directors, dealing with the ATO when an individual or company is being pursued for unpaid tax debts, negotiating payment plans for tax debts, addressing garnishee notices, director penalty notices, winding up or bankruptcy proceedings and pursuing unpaid amounts under commercial agreements.

The next 3-6 months are going to be challenging for businesses both big and small and this will likely be a global economic problem. We can’t give you more advice on the health issues but if you would like to discuss a legal health check for your business then we are keen to remain as available as possible to clients.

To assist in that objective, we are now set up to conduct client meetings by either Skype or iPhone Facetime – and the old-fashioned telephone and email of course work very well.

We are also happy to offer fixed price initial consultations at $350 plus GST for up to an hour (which represents over 40% reduction to the usual fees), so that new clients can feel comfortable that they are not handing over a blank cheque. Our objective is to give you the best advice for you to then make informed decisions. Call or email us today if you think we can help.

Roger Blow P: +61 8 6381 0326 or e: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

Changes to Director Penalty Notices

July 4, 2019 Roger Blow

Since April 2019 there has been an important change to the Director Penalty Notice (DPN) regime in relation to a Director’s personal liability for an unpaid Superannuation Guarantee (SG) debt.

A Director will now be personally liable if a company’s SG liabilities are not remitted within 28 days of the end of each quarter. Previously a Director had 3 months to report their superannuation and settle the debt without the risk that the ATO would issue a lockdown DPN.

A Director who fails to lodge SG returns within the 28 day time period will cause the ATO to issue a lockdown DPN, which makes the Director automatically liable for those specific debts and prevents them from escaping liability via a liquidation/administration.

Directors should note that these changes do not alter the 3 month period allowed for the settlement of a company’s PAYG debt.

Cove Legal are experts in assisting clients with contentious tax matters and insolvency proceedings. We provide advice on ATO payment plans, director penalty notices, winders and all other aspects of ATO debt recovery action. Practice Director Roger Blow has acted extensively on behalf of the ATO in Perth and has specific expertise in tax related disputes.

Roger Blow P: +61 8 6381 0326 or e: roger@covelegal.com.au

Tax Litigation Update

March 21, 2019 Roger Blow

At Cove Legal we are very active in the tax litigation space and two recent decisions particularly caught our eye.

Firstly in Arbuckle v Commissioner of Taxation [2019] WASC 7 Martin J dismissed Mr Arbuckle’s Appeal against the sentence imposed by the Magistrate’s Court.

The Court found that Mr Arbuckle’s long-standing failure to meet his tax obligations did warrant a 6- month suspended prison term. He was released on the undertaking to be of good behaviour for a period of two years.

In handing down the sentence, Magistrate Huston said he needed to “send a message very clearly to Mr Arbuckle that he needs to be discouraged from engaging in this form of unlawful behaviour ever again.”

“I also need to send a message to the broader community that the expectations in the legislation for lodging income tax returns and business activity statements is not something to fit in when life is convenient. They have to be prioritised because it’s a legislative requirement to do those things.”

The second decision is Deputy Commissioner of Taxation v Nore [2019] WADC 27 which saw the District Court dismiss an ATO summary judgment application against Mr Nore on the basis that there was sufficient uncertainties in the ATO’s case (despite the ATO claiming Mr Nore had no defence to the claim) to justify the matters being aired in court.

Mr Nore had been issued with a Director Penalty Notice with respect to a company that failed to remit superannuation guarantee charges. There are a number of steps a Director can take in order to avoid personal liability in that scenario. Some of those actions were undertaken by Mr Nore with the Court observing “In the circumstances … I am struggling to see what the defendant could have done.”

The two decisions perhaps sit at opposite ends of the true litigation scale: the Supreme Court showing a willingness to endorse custodial sentences for more serious personal tax omissions whilst the District Court is resisting the Commissioner’s attempts to rely upon his procedural/legislative advantages so as to prevent arguable defences from being properly considered by the Courts. Both show that tax disputes can very much turn on their own particular facts and circumstances and require specialist guidance.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au

Garnish*

December 5, 2018 Roger Blow

* Verb
1 decorate or embellish
2 serve notice on a 3rd party to seize money

A garnishee notice is served on a third party that owes you money (or holds money on your behalf), requiring that the third party pays some or all of that money direct to the entity issuing the notice. In recent years it has increasingly become one of the ATO’s favourite weapons to enforce the payment of outstanding tax debts.

This can include the diversion of wages owed to you by your employer, the contents of your bank accounts, proceeds of sale held by a property settlement agent or amounts owed by trade debtors.

Unlike your average creditor, the ATO does not need to seek a court order to issue and enforce a garnishee notice. You do need to be served with a copy of the notice.

If you are in the process of a court or AAT appeal in which you are disputing the assessment under which you owe the tax debt, then the ATO is required to consider whether garnishing funds would prejudice your ability to pursue the appeal. Recent case law suggests that this assessment by the ATO is at times open to challenge, as the taxpayer (and the Courts) may not always agree with the ATO’s assessment as to what will or will not prejudice the taxpayer’s capacity to address their tax appeal. We have also seen cases where garnishee notices have been improperly issued against joint bank accounts concerning individual debts – so the issue of a notice is not always the end of the story. Call us if you would like any further help in addressing a garnishee notice.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au