ATO not an ATM – Tax Office to restart debt recovery program

The last two years have seen many changes for Australians, one small change, was that the ATO understandably took a back step in utilising all its debt collection powers. This was a welcome relief for a lot of individual taxpayers and business owners who may have had outstanding debts with the ATO but were seeing dwindling cashflow due to lockdowns.

 With vaccination rates increasing quickly and lockdowns coming to an end this week in Australia’s two most populated states, the ATO has flagged its discomfort with being treated as a “line of credit”

 Additionally, the ATO have been given new powers to disclose tax debt information to credit reporting bureaus if taxpayers have a debt of over $100,000 and fail to engage with the ATO within 28 days of the debt falling due.

 While this will not impact most tax payers, it signals a clear intention by the ATO to restart its debt collection processes.

 When you consider this in the shadow of a looming federal election, likely in February or March next year, this will mean that both sides of the political persuasion will want to show positive economic news. Given that personal and company tax collections make up on average 65% of Australian Government revenue it shows that the ATO collections will be a focus for any government.

 Figure 1: Components of Australian Government revenue

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2020–21, statement 5: Revenue—online supplementary tables.

Figure 1 illustrates Australian Government revenue by its major components. Personal income tax (income tax withholding) is, by a margin, the largest component of Australian Government revenue, accounting for around 47.2 per cent of total Government revenue in 2019–20. Company tax is the second largest component, accounting for around 18.1 per cent of total revenue, followed by goods and services tax (13.4 per cent), excise and customs duty (8.8 per cent) and non-tax revenue (8.0 per cent).

Current debts owed to the ATO increased to $34.1 billion in 2020 as COVID started to have an impact on tax payers cash reserves. Of this debt, small business tax payers accounted for $21.4 billion.

The good news is that Salt Financial Group are here to help. The best course of action is to maintain communication with the ATO. We understand that this can be a daunting task for most clients. Our team of accountants are the best people to make these calls on your behalf. We have experience with handling these matters and keeping negotiations with the ATO calm and achieving the best outcomes for our clients.