The ATO has suspended “firmer” debt and lodgement activities across lockdown-affected states and territories, but has held off from an outright pause on all compliance activities.
ATO hits pause on ‘firmer’ tax debt collection
The move will see individuals and businesses in NSW, Victoria, and the ACT given more leeway around their tax debts as the ATO looks to mitigate the impact of COVID-19 lockdowns.
The suspended “firmer activities” are expected to include garnishee notices, statutory demands, and the ATO’s latest weapon – the disclosure of business tax debts to credit reporting bureaus.
The Tax Office, however, has confirmed that it will not implement a universal pause on all compliance work, a departure from its position last year where it halted all debt and lodgement campaigns in light of the COVID-19 pandemic.
“We have not halted our debt and lodgement activities,” an ATO spokesperson told Accountants Daily.
“But in our engagement, we are mindful of the environment in which clients are operating, particularly those clients in extended lockdowns and [we will] tailor our enforcement approach for clients who are adversely impacted by these lockdowns.”
The ATO’s decision not to pause all debt collection activities comes after it failed to hit its compliance revenue target by $1.3 billion last year, with collectable debt rising by 28 per cent to $34.1 billion.
However, with Greater Sydney looking at its 11th week of lockdown, while Melbourne pushes through the fourth week of its sixth lockdown, and Canberra enters its third week of lockdown, the ATO has been urged to reconsider its position.
“This is a positive move by the ATO but it doesn’t go far enough,” CPA Australia’s senior manager of tax policy, Elinor Kasapidis, told Accountants Daily.
“With so many businesses struggling right now there needs to be a moratorium on debt collection by government agencies. Now is not the time for governments to be hard-headed when it comes to compliance activity.
“Australian businesses need support to get them through lockdowns and to recover afterwards. We think the ATO should suspend all debt collection activities, not just the firmer work, like it did during the height of the pandemic last year. We’re not asking the ATO to waive these amounts, we’re just asking for some breathing room.”
Ms Kasapidis also believes the ATO should go one step further and reconsider late lodgement penalties as tax agents and their clients fall behind on their obligations.
“Many businesses and their agents are also struggling to keep up with reporting obligations and the ATO should consider a waiver of late lodgement penalties as well,” she said.
The Tax Office recently moved to introduce a new phone service for lodgement deferrals after tax practitioners provided feedback about their increasing workloads during the pandemic.
The concession will provide a deferral of up to 14 days for monthly obligations, 21 days for quarterly obligations, and 28 days for annual obligations.
The support, however, remains limited to five clients, angering some practitioners who believe a blanket lodgement deferral should be considered.