Ahead of Tuesday’s federal budget, Treasurer Josh Frydenberg has revealed a plan to allow the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery actions where the debt is being disputed by a small business with a turnover of less than $10 million.
Under the current law, a stay on ATO debt recovery action can only be obtained through the court system — a costly process that provides no certainty to small businesses on whether such a stay would be granted.
“Applying to the AAT instead of the courts will save small businesses at least several thousands of dollars in court and legal fees and as much as 60 days of waiting for a decision,” Mr Frydenberg said.
“Small business can now have the confidence and peace of mind that they will be able to pause ATO debt recovery actions until their case is decided by the AAT.”
Under the change, the Small Business Taxation Division of the AAT will be given the ability to pause or modify any ATO debt recovery actions, such as garnishee notices and the recovery of general interest charge or related penalties, until the underlying dispute is resolved by the AAT.
The new AAT powers will only be available to proceedings that have commenced on or after the date of royal assent of legislation.
According to the government, the change will bring Australia more into line with the tax systems of the United Kingdom and the United States. The US Internal Revenue Service (IRS) is unable to collect a tax debt until all avenues of appeal have been exhausted.
The announcement comes after the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) put forward a recommendation in April 2019 calling for a legislative amendment to allow the AAT to pause ATO debt recovery action.
The ASBFEO found that while the Tax Office contended that it rarely commenced debt recovery action for disputed debts before the AAT, it still occurred in 17 out of 143 AAT matters in 2017–18.
The measure comes after the ATO recently announced that it would make its small business independent review service a permanent feature, allowing businesses with an annual turnover of less than $10 million to seek an internal review of income tax, GST, excise, luxury car tax, wine equalisation tax and fuel tax credits disputes.