It’s back to business for the Australian Tax Office (ATO) as it resumes debt collection in NSW, the ACT and Victoria.
With COVID-19 causing unprecedented disruption, the Federal Government and the ATO have focused on keeping Australian businesses and individuals afloat for the last two couple of years.. Hence the ATO placed a long pause on collecting tax debt while states coped with lockdowns.
With COVID now at a ‘controllable’ level around the country and statewide lockdowns lifted, the ATO began to reclaim a record $55 billion last week.
The Tax Office will re-engage businesses and individuals who owe a tax debt. It confirmed on Tuesday that those owing the largest debts will be prioritised. The Tax Office told The Age that priority will also be given to companies and directors who failed to lodge their returns or pay tax on their workers’ superannuation payments. It added that financial penalties for non-compliance are likely to be “more noticeable” in Victoria, NSW and the ACT.
The ATO says it won’t be going too hard too early and that it will take an adapted approach to businesses that don’t yet have the cash flow required to service their tax debts.
A spokesperson for the ATO said that a “tailored” approach had already been applied to small business debt through the pandemic, citing it had helped more than 1 million taxpayers with payment plans to suit their circumstances.
The Tax Office will consider individual circumstances as some businesses have thrived through the pandemic, and others are barely hanging on.
The spokesperson said that interest-free payment arrangements were available and urged taxpayers to negotiate options for payments rather than avoid the ATO. They said, “We cannot help clients who do not engage with us.
“Enforcement actions will be prioritised for those clients representing higher risks and refusing to engage. Our initial focus will be on taxpayers with higher debts before including taxpayers with all other debts in the new calendar year. Taxpayers with Superannuation Guarantee debts may be prioritised irrespective of their debt value.”
ATO hasn’t gone soft
In recent years the Federal Government has doubled down its investment in the ATO. With the use of sophisticated technology, data-matching systems, and robust legislation, flagging and tracking anyone who owes a tax debt is easier than ever before.
Tax Ombudsman Karen Payne said that complaints received by her office suggest that so far, the ATO has pursued a non-aggressive approach to its debt collection. However, she added that it was too soon to have any insight into its approach regarding the re-commenced enforcement effort in Victoria, NSW and the ACT, having not yet received any complaints from the jurisdictions.
“Normally, we would expect debt complaints to be about 25 per cent of our total complaints, but at the moment, they’re about 17 per cent and the type of complaint we’re getting is also suggesting that the level of action in the community is, is not aggressive,” Ms Payne said.
“I do think [the ATO] is going to take a softly-softly approach, that’s my understanding, and our complaint numbers don’t suggest that they’ve gone out there with a vengeance.”