VIC Director's Liability - Can ATO Re-Open Debt Without Notification?

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9 February 2016
I was a director of a not for profit organisation (club) up until 2006. I recently put in for a tax refund only to find the refund was posted against an integrated account. The ATO advised me it was for directors penalties dating back to my period there.

I explained to the ATO for the better part of the last 10 years, I have annually lodged returns, had them all paid back to me. It's only now they tell me this debt was re-activated from been uneconomical to collect to active. I have never seen a notice from the ATO for any debt... I did say if there was one, why did they not pursue this debt with the directors since my tenure as it was a (club) debt. they had no answer other to say I am personally liable for the debt despite been another 7 directors on the board.

Can the ATO re-open debts without notification? It's been more than 4 weeks since my initial call and they told me they need to reconcile the account, to which they have not done so.

Any help please.


Hi JJSmith,

S47 of the Financial Management and Accountability Act provides that the Tax Commissioner must pursue recovery of all tax debts unless he or she is satisfied that the debt is not legally recoverable or considers that it is not economical to pursue recovery of the debt. If the Tax Commissioner makes a decision that there is justification for not pursuing a debt, the debt effectively becomes dormant or written off. Debts which have been ‘written off’ as uneconomical to pursue can be re-raised where it is considered that the person’s circumstances have changed. In this way the term ‘write-off’ differs from the commonly understood commercial meaning which is more in the sense of a final decision.

The financial ombudsman regularly receives complaints about this and an investigation has been undertaken into this policy as it is unfair to tax payers who are unaware of debts which may later be recovered against them.

Also, generally there is a 4 year limitation period on unpaid tax - which is subject to exceptions which are covered here:

PS LA 2009/3 - Indirect taxes: time limit on recovery (As at 10 December 2015)

I assume this limitation relates to debts that are the subject of a notice of assessment.