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

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Published: 24/11/23

Source: Thomson Reuters

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