The Australian Small Business and Family Enterprise Ombudsman’s report on early debt recovery action found that ATO debt recovery action occurred in at least 12 per cent of cases before the AAT, severely impacting a small business’s resources to prosecute its case and carry on its business.
“Strong forms of debt recovery action by the ATO, such as garnishee notices, can destroy a small business because it effectively strips funds from a small business’s bank account” ASBFEO Kate Carnell said.
“Consequently, the small business is not able to pay wages, rent, suppliers or bank loans and the follow-on effects of this — bad reputation, no credibility and potential bankruptcy — are significant.
“Immediate action to improve ATO approaches is critical since heavy-handed enforcement actions, such as a garnishee notice, effectively freezes a small business’s bank accounts and can regularly mean the end of that business.”
Ms Carnell has called for the Tax Office’s use of garnishee notices to receive mandated external oversight and approval.
“Despite the devastating impact on small businesses, the ATO alone has the authority to produce garnishee notices without any external oversight,” Ms Carnell said.
“ATO garnishee notices must be actioned only with appropriate oversight and approval, such as the court system, before an order can be issued.
“The asymmetry in power between this large and powerful organisation and the small business sector has left these particular small businesses in a vulnerable position, and with diminished access to justice, they simply don’t have the same resources to fight where there is a legitimate dispute.”
The report follows from a new tax concierge service at the ASBFEO offering a discounted consultation with a tax lawyer, and a new dedicated small business taxation division within the AAT which will provide closer assistance for taxpayers in dispute.
More to come.