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Bankruptcy Discharged but ATO Tax Debt Unfinalised?

Discussion in 'Debt and Bankruptcy Law Forum' started by remisha, 13 February 2015.

  1. remisha

    remisha Member

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    I declared bankruptcy in 2010 and was discharged in 2013. In my initial application for bankruptcy, one of my creditors was the ATO. During the period of 2010-2013 when I recieved my Notice of Assessment, it showed a balance of zero after I had paid any outstanding amounts for that year . Just recently the ATO again have billed me for the amount that I had declared in my initial bankruptcy. I am not under any court orders. I have since contacted AFSA and received an email which outlines who the creditors were and the amount and current status, well under the heading Proof of Debt, the ATO debt is listed as unfinalised.

    Can anyone explain "unfinalised" to me? (I have tried numerous Google searches, virtually impossible to ring the ATO or AFSA).
     
  2. remisha

    remisha Member

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    Since posting the above i have some new info and so would like to put a simpler question to the forum.

    Is a debt to the ATO cancelled out at the time of going bankrupt or simply deferred until after discharge?
     
  3. John R

    John R Well-Known Member

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    Hi @remisha,
    In response to your original question:
    1. Did you receive a Notice of Assessment from the Australian Taxation Office (ATO) for the financial year (FY) that you entered bankruptcy? If yes, what does this Notice of Assessment advise in relation to your liability?
    2. I suspect that the ATO income tax debt is listed as "unfinalised" because a Notice of Assessment during the FY that you entered bankruptcy was not processed and/or your bankruptcy trustee has not updated the ATO as to the status of your bankruptcy.
    3. I suggest contacting your bankruptcy trustee for further assistance. In addition, it is important to keep comprehensive documentation when dealing with your bankruptcy trustee and the ATO as you resolve this issue.
    In response to your clarified question, my understanding is that:
    1. Income tax debts incurred to the ATO before the date of bankruptcy are "extinguished" (that is, cleared) on bankruptcy.
    2. This is because income tax debt is "unsecured debt" (that is, the ATO is a normal, unsecured creditor with no right to take possession of your property after you enter bankruptcy in relation to the income tax debts incurred before your bankruptcy) and a "provable debt" under section 82 of the Bankruptcy Act 1966 (Cth) (that is, the ATO as creditor must prove that the debt exists and can only claim proportionate repayment of the debt if any money is raised from the sale of your assets). Further information from AFSA: Your debts and creditors — Australian Financial Security Authority
    I trust this assists you. Please keep us updated with your progress.
     
  4. remisha

    remisha Member

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    thank you John R for clarifing that . i obviously still have some work to do to get this finalised but will post progress report as the situation unfolds.
    regards
     
  5. remisha

    remisha Member

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    Turns out that my whole period of stressing over this was a wasted exercise.
    Rang the AFSA today and clarified that my debt to the ATO should have been cleared after Discharge.

    Rang ATO and was put through to the Insolvency Department.
    The ATO Insolvency Department told me that the outstanding debt was just their way of procedure for their accounting and that they were not pursuing this debt because it was cleared.

    When I first received this notice, I rang the ATO and was told the ATO never forgive a debt (I did not state at this time that I was a discharged Bankrupt as i thought that this info would be onscreen for the operators viewing. Wrong!)

    When I stated today that I had been Bankrupt, the operator said she could not help me and was transferring my call to the ATO Insolvency Department. I did not even realise that ATO had a dedicated Insolvency Department. I now just need to fax ATO the Notice of Discharge

    So all is good. Hopefully the posts will be of some benefit in the future should someone encounter a similar situation.
    My thanks again to John R for taking the time to explain things a bit better 4 me
     
    John R likes this.
  6. John R

    John R Well-Known Member

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    Anytime @remisha,
    I'm glad that you were able to resolve the issue (and kind enough to help other forum members that may encounter the same or similar issue in future). :)
     

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