After easing off on its debt collection activities during the height of the COVID-19 pandemic, the Australian Taxation Office (ATO) is now ramping up debt collection, actively pursuing the recovery of billions of dollars in outstanding tax liabilities.
As a key part of the recovery program, the ATO has been writing to individuals and businesses with outstanding tax debts, warning it will take further action unless they make contact and develop an acceptable plan to repay.
In addition to its regular engagement activities, the ATO has recently written to around 70,000 businesses under its two key client awareness programs – Disclosure of Business Tax Debt and the use of Director Penalty Notices.
Under the Disclosure of Business Tax Debt measure, the ATO may in certain circumstances disclose a taxpayer’s tax debt information to credit reporting agencies.
The Director Penalty Notice awareness program contacts directors of companies that have overdue amounts in respect of PAYG withholding tax, the Superannuation Guarantee Charge, and GST.
Directors are being advised they may be personally liable if their company debt is not actively managed.
These programs are focused on those that have not responded to its calls and letters and have significant outstanding tax obligations.
Refunds to offset debt
Whilst the ATO has not pursued many business tax debts during the pandemic, they also allowed tax refunds to flow through even if the business had a tax debt. That position has now changed and the ATO has resumed debt collection and offsetting tax debts against refunds.
If you have a tax debt that has been on hold, expect the ATO to offset any refunds against this debt, and take steps to actively pursue the payment of the debt.
Small business account for around two thirds of the total debt owed to the ATO. If you have a tax debt, it is important that you engage with the ATO to work out how this debt will be paid.
Working with the ATO – communication is key
Any taxpayers with outstanding debts must manage their tax payments. Especially now as the ATO are ramping up debt collection particularly against those that aren’t engaging with them.
The Disclosure of Business Tax Debt to credit reporting agencies is a relatively new tool in the ATO’s debt collection procedures. This will affect the business/individual credit rating and the business’s ability to raise funds.
The key thing is that you’ve just got to engage with the ATO. They’re targeting people who aren’t engaging and/or who aren’t reporting their debts.
How can Walsh Accountants help?
If you’re having difficulty meeting your tax obligations, we encourage you to contact us to discuss your circumstances so we can provide you with the most appropriate assistance and advice.
As business specialists, we understand the nature of cash flow and know that businesses can sometimes have cash flow issues which could limit their ability to pay their whole tax bill on time.
We can help you negotiate a payment plan with the ATO that works in with your cash flow and limits your exposure to the latest ATO debt recovery programs.
If you need assistance, we encourage you to contact our team as soon as possible. As we said above, communication is key and we can assist you to communicate with the ATO to find an outcome to satisfy both parties.