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ATO flags small business tax debt, SG as target areas

Tax

Addressing collectable debt and improving small business tax performance continue to be critical focus areas, the ATO warns in its annual report.

By Miranda Brownlee 9 minute read

The ATO says addressing collectable debt, improving small business tax performance and strengthening superannuation guarantee (SG) will be important focus areas in its strategy for the remainder of FY24.

In its annual report for 2022–23, the Tax Office said small business collectable debt reached $50.2 billion at 30 June 2023, an 89 per cent increase from 30 June 2019.

“It’s our responsibility to ensure a level playing field as we support businesses who are doing the right thing and paying on time,” Commissioner of Taxation Chris Jordan stated in the report.

Mr Jordan said the ATO has already taken strong and deliberate action against those unwilling to work with the Tax Office as it increased its activities across debt collection.

While small business currently had the largest proportion of the collectable debt book, Mr Jordan said the ATO remained focused on non or late payment in every payment group in the tax system.

“We want to encourage a culture of paying tax on time and in full,” he said.

In its annual report, the ATO said it informed clients of their obligations and the actions the regulator might take if they chose not to engage with the Tax Office.

“Clients who chose to not engage with us were subject to firmer and stronger action, to help mitigate the growth in collectable debt,” the report said.

The awareness campaigns and firmer action warning notices were followed by 17,901 director penalty notices, 867 disclosures of business tax debts made to credit reporting agencies, 2,934 garnishees and legal recovery action.

“We intentionally prioritised the recovery of super guarantee debts, high-risk debts and other high-value debt cases, and fraud-related debts such as those raised through Operation Protego,” the Tax Office said.

The ATO also sought to increase system participation by small businesses during 2022–23 by encouraging them to opt in to services with an integrated digital ecosystem to meet their tax, superannuation and registry obligations as seamlessly as possible.

“We piloted this model in collaboration with small businesses, tax professionals and digital service providers,” it said.

“The aim was to drive improved tax performance, support better cashflow management and reduce the likelihood of getting into tax debt.”

The ATO also expanded the use of STP data to try to simplify employer reporting obligations and proactively address super guarantee non-compliance.

The ATO said it was matching data from superannuation funds with the amounts reported by employers through STP for each employee-employer relationship.

“While we already use these data sets in existing compliance activities,” it said.

The ATO said this new approach would:

- Improve its ability to identify a range of behaviours that drive non-compliance.

- Help it to tailor interventions for late payment, underpayment, and non-payment of super guarantee.

“This work will continue in 2023–24, to enable earlier intervention by the ATO with employers that are not meeting their obligations,” the regulator said.

“Our focus on expanding the use of data to improve super guarantee integrity in general will also continue in 2023–24.”

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