There have been some high profile changes to Insolvency Law in 2012 that advisers, and company directors should be aware of. The most notable change expands the reach of the ATO’s Director Penalty Regime.
These changes to the Tax Office’s power to chase company directors for their company’s tax debt have been before parliament for some time. Originally introduced in May 2011 the government withdrew the first draft to seek further industry consultation. This version was introduced for public consultation in April 2012, went before Parliament in June and became law on 29 June 2012.
The headline changes are:
The three month reporting deadline (part (b) above) is the big news in our opinion. This change has made a lot of company directors automatically liable for retrospective debts with no hope of avoiding a penalty through a liquidation. Our advice if you or your client finds themselves in this situation is still to put the company into liquidation. Our feeling is the ATO are under resourced to enforce these new powers to their full potential and that a company already in liquidation will be their lowest priority.
On the 26th of May this year the Corporation Amendment (Phoenixing and other measures) Bill 2012 became law. Amongst smaller changes this Act gives ASIC the power to appoint a liquidator to abandoned companies to facilitate payment of employee entitlements (most likely under the government’s GEERS scheme).
ASIC have since released a Consultation paper detailing how and when they propose to use these powers. The paper indicates they will only be appointing a liquidator if; the cost of the liquidation is lower than the value of employee entitlements, and when they are sure they have waited long enough to give other creditors a chance to initiate a liquidation. It sounds to us like they will rarely exercise this power, and once they do it will be 18 months to 2 years after the company is abandoned.
“I’ve now referred two liquidations to Dissolve and in both cases my clients were amazed at the ease of the appointment process and how quickly the liquidation was finished.”…
Partner of a Sydney Accounting Firm
“Cliff and his staff provided a fast, efficient and friendly service. The process was simplified and all steps were communicated well. The price was exactly as advertised with.”…
Director of a Property Development Company
“…after I gave Dissolve the go-ahead I received the No Asset Liquidation Package within two hours and I had the company in liquidation the next morning.”…
Director of a Fashion Retailer