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ATO takes gloves off to chase down $4bn in long-term debt

Regulation

Tighter payment plans and an end to interest and penalty remissions are just part of a tougher stance, a deputy commissioner says.

By Christine Chen 10 minute read

The ATO has taken its gloves off to collect at least $4 billion owed by 40,000 businesses with tighter payment plans and unhesitating court action for waverers.

Remissions on interest charges and penalties would become the exception rather than the rule and “there will be exits”, deputy commissioner Vivek Chaudhary said.

“Through the pandemic we shifted our focus from debt collection to stimulus payments and assistance with tax, but it is now time to re-establish the culture of paying tax on time.”

The hardline stance comes after a “concerning” increase in collectable debt, which has surged by 89 per cent to $50.2 billion over the past four years. 

Mr Chaudhary singled out small businesses as being responsible for $33 billion of the $45 billion of collectable debt owed by businesses.

“Businesses appear to be de-prioritising payment of tax and super when they should be provisioning for these bills like they would with any other business expenses … businesses are waiting for us to contact them, rather than taking early actions to pay,” he said.

The ATO would use budget funding of $82 million to crack down on thousands of businesses with debts of $100,000 and above or older than two years.

“For these clients, concessions are no longer available, and their debts will progress straight to firmer actions,” he said.

“Over the life of this program, we expect to action just under 40,000 accounts with overdue tax and super debts and collect around $640 million. We also expect that there will be exits.”

He said businesses should no longer rely on a lenient approach, with payment plans and general interest charge remissions only available in rare circumstances.

“As a consequence of our more lenient approach during the pandemic, we have seen an increased expectation that interest and penalties will be remitted.”

“Payment plans will be limited, and those that are accepted will need to be completed within shorter periods and align with reporting cycles.”

Similarly, there would be little sympathy for businesses with unpaid superannuation and employers taking advantage of employees would be “held to account”.

“We will continue to apply a full range of firmer actions including garnishees, directions to pay, director penalty notices, disclosure of business tax debt and prosecution actions, to ensure payment,” Mr Chaudhary said.

“Where businesses continue to trade without addressing their super guarantee charge debts, we will escalate our actions towards wind-up and bankruptcy where appropriate. We are serious about collecting unpaid super.”

The ATO’s stronger recovery stance had “shifted the business landscape in relation to ATO debt recovery” in the past 12 months, he said.

Mr Chaudhary said the ATO intended to continue increasing legal recovery actions, filing 100 wind-ups in July alone. Over 24,000 director penalty notices and 19,000 intent to disclose notices were also issued in the past year.

“It’s not fair for businesses with large outstanding debts to continue to use the ATO as a low-interest loan facility,” he said, echoing the comments of ATO boss Chris Jordan on Wednesday.

“It is now time to re-establish the culture of paying tax on time … we need to bring collectable debt down for the benefit of the Australian community.”

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Christine Chen

Christine Chen

AUTHOR

Christine Chen is a graduate journalist at Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector.

Previously, Christine has written for City Hub, the South Sydney Herald and Honi Soit. She has also produced online content for LegalVision and completed internships at EY and Deloitte.

Christine has a commerce degree from the University of Western Australia and is studying a Juris Doctor degree at the University of Sydney. 

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