In this edition of ‘It depends’, lawyer Jack Colley talks about what you should do if the ATO is suing you. We’ve seen a number of clients come to us recently who have been served with a statement of claim by a Deputy Commissioner of Taxation. In this video, Jack talks us through the steps you should take if this happens to you and how we can help.
Hi, welcome to It depends and today we’re going to be talking about what to do if the ATO is suing you. After a COVID hiatus, the ATO has recently restarted suing taxpayers who have outstanding tax debts. A recent report in the press suggested that they’ve issued thousands of statements of claim recently and anecdotally, we’ve also seen a number of clients come to us who are being sued by a Deputy Commissioner of Taxation for outstanding tax debts owing. So, what do I do if the ATO is suing me?
Figure out what the debt is
After you’ve been served with a statement of claim by the ATO, the first step is to figure out what the tax debt relates to. It may relate to income tax, super guarantee, GST, or interest and penalties. Once we have worked out what the tax debt relates to, then we can work out a plan of action for dealing with the ATO.
Is there a dispute regarding the amount of the debt?
In some circumstances, there may be a dispute as to the amount owing to the ATO. This may include where you believe you’ve been incorrectly assessed by the ATO, where you have a valid defence to a director penalty notice, or there are grounds for remission of interest and penalties. In these cases you should engage with the ATO to outline why you believe the amount that the ATO alleges you owe should be reduced.
Working with the ATO to settle proceedings
In many circumstances, the ATO is suing taxpayers because they have not engaged with the ATO about working out a plan to pay the outstanding debt. In these circumstances, it’s usually worthwhile to engage with the ATO to work out a payment plan. Once a payment plans in place the ATO may be more inclined to settle the proceedings out of court.
Avoid default judgement
Most importantly, is crucial you do not ignore the statement of claim. If you do not file a defence of the statement of claim, the court may issue a default judgment against you for the amount of the ATO is suing you for. Once a default judgment is issued, it is very difficult to overturn. Usually, the first step after being served with a statement of claim is to file a defence to the court. The defence must be filed within 28 days of being served with the statement of claim.
If you have been served with a statement of claim by a Deputy Commissioner of Taxation and would like assistance, please reach out to a member of our team.