Real stories: Understanding the legal jargon in financial matters
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 $90,000. 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 help.
Ron had little understanding of the ATO reporting requirements for his sole trader business. It had closed more than five years ago. His ex-partner was the bookkeeper and he knew nothing about lodging BAS, or paying bills. He said it was his ex-partner’s job to do this.
Ron had no idea that the 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 a further explanation of how the debt came about (SGC).
Ron didn't understand about the possibility of declaring bankruptcy. He said, "I was also confused by all the different emails from the ATO with the various amounts owing. I didn't know how much I owed in total".
The Better Place Australia financial counsellor sat with Ron through a full session. She went through the different terminologies and what they meant, including what super guarantee charge was and how it was incurred (as the sole trader the ex-partner had made herself an employee, therefore a wage was paid). She explained how PAYGW was payable along with superannuation, how GIC was added to the account for unpaid tax, the pros and cons of bankruptcy.
As part of the mediation, 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.
The financial counseller asked questions on behalf of Ron, including why the ATO had spent taxpayers money taking some one to court who had no capacity to repay. The ATO stated once a process is commenced it needs to be finalised. Ron indicated he would apply for bankruptcy, but hadn’t at the time proceeded with it.
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 had conflicting amounts which was confusing to the client. The ATO agreed to emailing a breakdown of the amounts.
Client’s options
Ron's options were to wait for the ATO to continue the process and place him into bankruptcy – or lodge an Application for Voluntary Bankruptcy by the deadline date.
Ron said he appreciated the financial counsellor advocating and supporting him through the process and explaining what had gone on. It provided him with some sense of control and 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.
If you don't understand the legal jargon, get professional help.
Financial First Aid free financial counselling
Financial First Aid free financial counselling and mediation services are available to people who have money troubles and live in one of the many government funded areas across Victoria. First step is to enquire online or request an appointment.
For more real stories about people with financial troubles and how Financial First Aid financial counsellors mediated for them, go to the Financial First Aid website home page and scroll down to Real Stories. Financial First Aid is an arm of Better Place Australia focusing on people with money problems.
