ATO shifting to firmer debt collection activity

The Australian Taxation Office (ATO) has flagged a return to firmer debt collection actions after seeing a trend of profitable businesses that have the capacity to pay their tax debts but are actively choosing not to do so.

The ATO warns business taxpayers not to treat tax liabilities like a free loan and reiterates that businesses are only temporary custodians of GST, PAYG withholding and super guarantee amounts. In addition to its ability to apply general interest charge (GIC) to unpaid debts, the ATO is preparing stronger enforcement actions, including issuing garnishee notices, Director Penalty Notices and legal action.

In a recent speech, the Commissioner of Taxation, Chris Jordan has unapologetically flagged the ATO’s shift to firmer debt collection actions where appropriate. This coincides with reactivation of debts that the ATO previously put on hold during the 2020 COVID-19 pandemic.

The Commissioner of Taxation, noted that most collectable debts with the ATO are self-assessed and include not only income tax debt, but also unremitted GST, unpaid PAYG withholding and super guarantee charges related to businesses. In addition, he noted that small businesses continue to be over-represented in the ATO’s debt book, owing over $33 billion of the $50.2 billion of collectable debt, with $23 billion of that being unpaid business activity statement debt.

In summary, should taxpayers not pay their tax by the due date or engage with the ATO by the due date to work out a payment plan, general interest charges (GIC) will be applied to any unpaid amounts. GIC is automatically calculated on a daily compounding basis on the amount outstanding and added to taxpayers’ accounts periodically. In addition, the ATO may utilise the other tools available to them such as garnishee notices and Director Penalty Notices (sometimes without any significant warning).

The ATO is also legally required by law to use any credits or refunds taxpayers become entitled to, to pay off any debt that is owed (including any debts that are “on hold”) by way of offsetting. This includes any refund that individuals may receive in relation to income tax, and any GST refunds that businesses may receive.

Our team at Mazars regularly communicate with the ATO and can assist with managing tax obligations and payment plans. If your business has a tax debt and requires assistance deciding on an appropriate strategy, please contact your usual Mazars adviser or alternatively one of our specialists via the form below or on:

Brisbane – Nathanael Lee

Melbourne – Liliana Harris

Sydney – Max Moujalli

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

* mandatory fields

Your personal data is collected by Forvis Mazars in Australia, the data controller, in accordance with applicable laws and regulations. Fields marked with an asterisk are required. If any required field is left blank, it will not be possible to process your request. Your personal data is collected for the purpose of processing your request.

You have a right to access, correct and erase your data, and a right to object to or limit the processing of your data. You also have a right to data portability and the right to provide guidance on what happens to your data after your death. Finally, you have the right to lodge a complaint with a supervisory authority and a right not to be the subject of a decision based exclusively on automated processing, including profiling, that produces legal effects concerning you or significantly affects you in a similar way.

 

Published: 24/11/23

Source: Thomson Reuters

All rights reserved.  This publication in whole or in part may not be reproduced, distributed or used in any manner whatsoever without the express prior and written consent of Mazars, except for the use of brief quotations in the press, in social media or in another communication tool, as long as Mazars and the source of the publication are duly mentioned. In all cases, Mazars’ intellectual property rights are protected and the Mazars Group shall not be liable for any use of this publication by third parties, either with or without Mazars’ prior authorisation. Also please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.