Can you object to an ATO statutory demand assessment?

Can you object to an ATO statutory demand assessment?

A statutory demand issued by the ATO is still governed by the Corporations Act 2001 (Cth), but it can create a different problem compared to a typical creditor debt. In some cases, the debt can arise from a formal tax assessment, meaning the issue is not just whether the demand is valid, but whether the underlying tax liability can be challenged at all. Disputing a tax assessment does not automatically stop a statutory demand, both issues need to be handled separately and within strict timeframes.

What is An ATO Assessment?

An ATO assessment is the ATO’s determination of a tax liability. It sets out the amount the ATO believes is payable based on lodged returns, amended assessments, audits, or even estimates in the absence of proper reporting. Unlike trade creditors, an ATO debt can be supported by an assessment or notice that has been issued before the statutory demand is served. The assessment itself carries legal effect unless it is successfully challenged through the tax objection process.

ATO Statutory Demands: What options exist before it escalates further?

Once an assessment has been issued, the focus shifts from determining the debt to dealing with it. The ATO expects early engagement and may consider payment proposals before matters escalate. However, if a company remains disengaged or cannot demonstrate a credible plan, the ATO can and does take firmer action. Directors should quickly gather relevant tax information, including:

• Account Statements 
• Lodgement status
• Payment history
• Any existing or proposed arrangements with the ATO

If the company is already insolvent, delaying the issue may increase director risk and limit the availability of restructuring or liquidation options.

Can you dispute the underlying tax debt?

Yes. But this is done through the tax objection process, not the statutory demand itself. This involves lodging an objection with the ATO and potentially progressing the dispute through the AAT or Federal Court. 

Under section 459E, a statutory demand assumes the debt is due and payable. Even if you intend to dispute the tax assessment, the demand remains enforceable unless it is dealt with separately.

What happens if you do not act?

When a company do not take any action within the timeframes period, it is taken to have failed to comply with the demand. Under section 459C and 459F, the ATO can rely on that failure to establish a presumption of insolvency and proceed with a winding up application.

At this point, the focus shifts away from whether the tax debt is disputed and toward the fact that the company is now presumed to be insolvent. This can limit the ability to deal with the issue on its original terms.

The Importance of Seeking Professional Advice

This article has aimed to provide general information about if one can object to an ATO statutory demand assessment, however, every company’s exact circumstances are different. We strongly encourage directors seeking to understand whether they can dispute or object to an ATO statutory demand or underlying tax assessment and what options are available to give an insolvency professional like Dissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.