ATO Update: The ATO’s approach to personal insolvency agreements

The ATO is committed to supporting taxpayers who want to do the right thing and preventing those who don’t pay from gaining an unfair financial advantage.

We recognise that personal insolvency arrangements (PIAs) can produce beneficial outcomes, however we also need to balance our legal and policy obligations to be fair and reasonable in the application of taxation laws. This includes ensuring taxpayers meet their obligations in full where able, and acting appropriately to ensure future compliance where payment in full is not currently possible.

ATO staff refer to PS LA 2011/16 Insolvency - collection, recovery and enforcement issues for entities under external administration when considering PIAs. Our decisions are based on a consideration of each taxpayer’s individual circumstances, the interests of the ATO, the interests of other creditors and the wider community.

Some of the factors we consider when voting on a proposal are:

  • The type of debt
  • The details of the proposal (such as dividend amount, source of funds, dividend timeframe)
  • Outstanding amounts including outstanding obligations
  • Any association between the debtor and other creditors
  • Compliance history as this may be an indicator of the debtor’s ability to comply with future lodgement and payment obligations
  • Financial information contained in the proposal
  • The debtor’s personal circumstances.

One of the most common issues we encounter when assessing PIAs is where a taxpayer’s lodgement obligations are not up to date. This makes the ATO debt difficult to quantify and will likely cause us to vote against the proposal. 

The ATO will always indicate the reasons for voting no to a PIA (on the voting form), unless we are unable to disclose information based on taxpayer’s particular circumstances due to privacy provisions.

Where you are concerned with the ATO’s voting position or would like to discuss a matter, you can email us. We value your feedback as it is important in assisting us to continually improve our processes to better serve you.

Please send your contact details to InsolvencyPractitionerServices [at] ato.gov.au.

More information

For general information refer to the insolvency practitioners’ section on ato.gov.au/insolvency

Bronwyn Du Mont
Director, Debt — Significant Debt Management
Australian Taxation Office