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Will going AWOL from your company save you money?
Going AWOL
What happens if a sole director and shareholder just goes AWOL – absent without leave? If their company keeps trading but they take all the cash and walk away from all tax obligations – what happens then?
So imagine there is a sole director. And they don’t lodge any BAS. They don’t lodge any tax returns. Don’t pay any ASIC fees. They change their address and don’t tell ASIC or the ATO. And they keep trading – charging GST – despite the ATO cancelling their GST registration and despite ASIC deregistering their company. They just keep going and ignore all else. What happens when a director goes AWOL like this?
This is the question Geoff Stein of Brown Wright Stein Lawyers will discuss with you in this episode. Here is very short excerpt of what we learned. Please listen in as Geoff goes into a lot more detail.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Going AWOL
If you walk away from ASIC and ATO debts, the debt is not going away. You are just relying on ASIC and ATO not to do anything about it.
If the ATO wants to get nasty about it, they can. There are a number of tax offences they can charge you with when you sink a company like that.
Eventually ASIC will start a strike off process and deregister the company, but your debt is still there, waiting for you. Deregistration of the company does not mean it is liquidated.
Consequences
When you sink a company like this, what happens next is not a matter of law but a matter of administration. Are ASIC and ATO willing to sink resources into pursuing you?
If you don’t own significant assets like a car, family home or share portfolio, they probably won’t.
Sleep Test
In the end it comes down to a sleep test. ASIC and ATO might be coming after you with significant consequences. Or they might not.
If this stops you from sleeping at night, you should clean things up. You can always enter into a payment arrangement.
Deregister
When you voluntarily deregister a company, you need to confirm there are no liabilities or assets exceeding $1000 in value. This includes Div 7A receivables. If you lie, you are committing an active act of perjury.
No Capital Loss
Having ASIC deregister your company means that the company is not liquidated, just deregistered. So there is no CGT and hence no capital loss you could claim.
For a capital loss you need a liquidation. The liquidator needs to confirm that the shares are now worthless.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 14 December 2020
Tax Talks spoke to Geoff Stein - Partner at Brown Wright Stein Lawyers - for more details.
