Directors grounded, funds seized: ATO’s ruthless tactics to recover billions

The Australian Tax Office is using every weapon in its arsenal to recover billions of company debt including seizing funds from business accounts and stopping directors from leaving the country.

The Australian Taxation Office is using every weapon in its enforcement arsenal including departure prohibition orders and seizing funds directly from business bank accounts as it seeks to recover $105b in company tax debt, according to a leading expert.

Jirsch Sutherland partner and insolvency specialist Chris Baskerville said enforcement was no longer a threat but “it’s the new reality”.

“The ATO is using every legal tool at its disposal, and it’s catching a lot of directors completely off guard,” he said.

“We’re seeing the consequences first-hand: companies collapsing, directors going bankrupt, and livelihoods ruined.”

The ATO is cracking down on company directors that owe debt.

Mr Baskerville said the ATO continued to use its traditional weapons such as Director Penalty Notices which hold directors personally liable for unpaid tax and super; forcing companies into liquidation and individuals into bankruptcy; name and shame business debtors; and third part debt collectors.

However, he said they were also ramping up the use of garnishee notices – seizing funds directly from business bank accounts or debtors – and stopping suspect directors from leaving the country.

“If you focus on the garnishee notices, that’s the tax man reaching into the bank account of the taxpayer and pulling their taxes out of the bank account or they can go one step further and go to your customers and ask them to pay their customer bill directly to the taxman,” Mr Baskerville said.

“Garnishees are a very powerful tool and the interesting thing is that it means that when the ATO reaches into a taxpayers bank account, we as liquidators can’t get that money back and share it with the rest of the creditor body.”

Jirsch Sutherland Partner and insolvency expert Chris Baskerville.

Mr Baskerville said while garnishees have always been around, the ATO was “ramping” them up but departure prohibition orders were more unusual.

“It’s the first time in 20 years of doing insolvencies that I have seen departure prohibition orders,” he said.

“If the tax man suspects you're moving your assets overseas and knowing you owe them money they are going to stop you from exiting the country.”

The ATO is seeking to recover up to $105bn in company tax.

Mr Baskerville said the ATO’s enforcement action was in response to the blowout in company tax debt.

“Pre Covid it was hovering around $25bn and then it doubled during Covid which itself is quiet extraordinary,” he said.

“I think what’s happened is that all of these lodgements have suddenly come in and what we are dealing with is $105bn. That's the biggest amount I have seen in 20 years in this game.”

An ATO spokesman said their approach to collecting the tax owed to the government was “deliberate and targeted”, with action being taken for those who repeatedly refused to engage or ignore reminders.

“For these taxpayers, we are moving more urgently to deploy the full powers available to us, and this has resulted in an increase in the use of actions including issuing director penalty notices, taking garnishee action, and taking wind up action if necessary,” he said.

“A Departure Prohibition Order is an enforcement action available to the ATO that prevents taxpayers with outstanding tax debts from leaving Australia.

“These are applied only in very specific circumstances, including where taxpayers are deliberately avoiding paying substantial amounts of tax they owe, and we determine alternate recovery options are limited.”

The ATO is doubling down on its efforts to recover $105bn in company tax.

According to the Australian Securities and Investments Commission in the 2025 financial year to May 25 there were 13,089 insolvency appointments compared to 9733 in the previous corresponding period – a 34.5 per cent increase.

According to the latest Alares Credit Risk Insights, May saw a significant spike in the ATO’s Court recoveries, including a sharp rise in winding-up petitions lodged against companies, as well as money-owing claims predominantly targeting directors personally.

“More than 30,000 businesses are now subject to the ATO’s tax debt disclosure program,” Mr Baskerville said.

“These businesses owe more than $100,000, with debts outstanding for over 90 days without adequate engagement with the ATO.

“Businesses flagged under this program face failure rates exceeding 30 per cent, making tax debt disclosure a key driver of Australia’s persistently high insolvency numbers.”

Originally published as Directors grounded, funds seized: ATO’s ruthless tactics to recover billions