We want to bring to your attention some crucial changes in the Australian Taxation Office’s (ATO) approach to debt collection, which may impact you and/or your business.

The ATO has recently adopted a more aggressive stance in its efforts to recover long-term debts. This initiative entails stricter payment plans and a reduced willingness to grant interest and penalty remissions which will now be exception rather than the rule.

During the pandemic, the ATO shifted its focus towards providing stimulus payments and assisting with tax-related matters. However, it is now pivoting back to emphasise the importance of timely tax payments. The ATO is concerned about a significant increase in collectable debt, which has risen by 89% to reach $50.2 billion over the past four years.

Mr. Chaudhary (ATO Deputy Commissioner of Lodge and Pay) singled out small businesses as being responsible for a substantial portion of this debt, with $33 billion of the $45 billion collectable debt owed by businesses falling into this category. He noted that businesses should prioritise the payment of tax and super, treating them like any other business expense. Waiting for the ATO to make contact rather than taking early action to settle these obligations is no longer a safe strategy.

The ATO has allocated a budget of $82 million to target businesses with debts exceeding $100,000 or debts older than two years. For these clients, concessions will no longer be available, and the ATO will proceed with firmer actions to recover outstanding amounts.
Payment plans will be limited, and those that are approved will need to be completed within shorter timeframes aligned with reporting cycles. The lenient approach observed during the pandemic, which led to increased expectations of interest and penalty remissions, will no longer be the norm.

Furthermore, businesses with unpaid superannuation or those found exploiting their employees will be held accountable through a range of enforcement actions, including garnishees, directions to pay, director penalty notices, disclosure of business tax debt, and prosecution actions.

If your business has a tax debt over $100,000 it is crucial to act now and start to budget your cash flow to repay this debt. We also continue to urge businesses to ensure they lodge all their BAS and super commitments on time.

If you have any questions or receive correspondence from the ATO, we recommend you contact us for advice.