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Understanding the legal jargon

For the purpose of de-identifying, the client’s name in this case study is Ron.

Ron is a 48 yo male who has been receiving Job Seeker for the last five years. He is living with mental health issues, is separated from his ex-partner and has experienced a business failure.

The ATO had taken legal action against Ron for an outstanding tax debt over $90K +. Ron attended a hearing with the ATO unrepresented, as Legal Aid said they couldn’t assist him. Ron said he “felt anxious and didn’t understand what was going on really, a lot of legal jargon.” After the hearing he requested explanations of what was going on  from the ATO, but this still did not assist.

Ron had little understanding of reporting requirements to the ATO from his sole trader business that closed more than 5 years ago, as his ex-partner was the bookkeeper and Ron stated that they only worked in the business, knew nothing about lodging BAS, paying, or bills, ex-partner’s job to do this.

Ron had no idea that ATO was not paid, including his personal tax, BAS/GST/PAYWG and SGC.

Ron wanted to know why the ATO was chasing him to pay when he had no assets (not even a car) and only government income – job seeker, medical exemptions due to mental health. All this had been advised to the ATO and the options Ron had, along with further explanation of how the debt came about (SGC) and does he have to go bankrupt and if not what happens?  Ron was also confused by all the different emails with different amounts owing, not sure of how much in total.

The Better Place Australia financial counsellor sat with Ron through a full session going through the consequences of bankruptcy, the pros and cons. She explained to Ron what super guarantee charge was, how it was incurred – as the sole trader ex-partner had made herself an employee, therefore wage paid. PAYGW is payable and Superannuation, and GIC was added to the account for unpaid tax.

The financial counsellor organised a conference call with the ATO litigation lawyer and Ron. A senior litigation lawyer was also present. The financial counsellor asked on Ron’s behalf what would happen if he decided not to apply for voluntary bankruptcy. (Ron stated he didn’t know what words to use through the meeting.)

The financial counseller asked questions on behalf of Ron as he felt very intimidated by the ATO lawyers. The financial counsellor asked why the ATO had spent taxpayer’s money taking some one to court when they had no capacity to pay. ATO stated once a process is commenced it needs to be finalised. Ron indicated he would apply for bankruptcy, but hadn’t. The financial counsellor asked what would happen if Ron didn’t lodge a bankruptcy application by the court ordered deadline, and the ATO said they would proceed to place the client into bankruptcy, and that this would incur further legal costs.

The financial counsellor explained how this wouldn’t make a difference to Ron, it would be included in the bankruptcy, and reiterated how he had no capacity to pay.  The financial counsellor asked the ATO to confirm how much was owing on each account, ITA, IT and SGC, as previous emails have conflicting amounts which is confusing to the client. The ATO agreed to email a break up of amounts at the time of writing this case study.

Client’s options

Ron’s options are to wait for the ATO to continue the process and place him into bankruptcy – or lodge Application for Voluntary Bankruptcy by the deadline date.  Ron stated that he appreciated the financial cunsellor advocating and supporting him through the process, explaining what had gone on, his options and providing him with some sense of control, as he was now able to decide between the two options.

In the end, Ron decided to apply for Voluntary Bankruptcy and used the email from the ATO as evidence of the full amounts of each of the debts.

Financial First Aid has the tools and resources to help you understand financial matters better.

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