An application to reduce debt is a legal procedure by which a creditor can collect what a debtor owes by reaching the debtor’s property when it is in the hands of someone other than the debtor, such as rental bond’s refunds or financial institution accounts. The Commissioner of Taxation can recover outstanding debts through the issuing of a garnishee.
The Australian Taxation Office (ATO) can issue a garnishee notice to any financial institution that holds money for a business, and banks are legally required to make payments directly to the ATO. Mr. Cliff Sanderson, at Dissolve Company, says that between January and November 2012, 9,178 companies went into bankruptcy and the driver of a lot of small liquidations is the Australian tax office. He added that the situation was going to continue.
Before the Global Financial Crisis, the ATO was lenient to businesses, but now they are demanding payments. In 2009, the Australian Taxation Office helped businesses with deferred payments, interest-free payments and more flexible repayment schemes. According to ATO data, as of the end of June 2012, 41,830 payment arrangements were in place. The ATO schemes ended, and smaller businesses may find it hard to make tax payments.
Businesses are expected to pay tax, or action will be taken by the commissioner. The commissioner can issue a garnishment to the bank and also prevent the business owner from leaving the country. A freezing order can be placed on a business bank account. The ATO can also force a business to sell certain assets by a warrant of execution. The tax office closed 1,066 cases during the last financial year. The ATO said it is important to prevent further debt being incurred to the tax office and other parties.
The Commissioner of Taxation can recover outstanding debts on business bank accounts through the issuing of a garnishment, and banks are legally required to make payments directly to the ATO. The debt may be recovered from a business bank account by legal proceedings, or a further garnishee order with penalty interest added.
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