ATO Firmer on Debt Collection
The ATO has signaled a return to tougher debt collection measures due to a growing trend of profitable businesses choosing not to pay their tax debts, despite having the means to do so. The ATO has cautioned businesses against treating tax liabilities as free loans and reminded them that they are temporary custodians of GST, PAYG withholding, and super guarantee amounts. The ATO, led by Commissioner Chris Jordan, emphasises a shift towards firmer debt collection actions, including the application of the general interest charge (GIC) and more potent enforcement measures like garnishee notices and legal action.
Jordan, in a recent speech with less than six months remaining in his tenure, unapologetically announced the ATO’s stance on robust debt collection actions. This shift aligns with the reactivation of debts previously paused during the COVID-19 pandemic.
The Commissioner highlighted that a majority of collectable debts with the ATO are self-assessed, encompassing income tax debt, unremitted GST, unpaid PAYG withholding, and super guarantee charges related to businesses. Small businesses, accounting for over $33 billion of the $50.2 billion collectable debt, with $23 billion attributed to unpaid business activity statement debt, are disproportionately represented in the ATO’s debt book.
In general, failure to pay taxes by the due date or engage with the ATO for a payment plan results in the automatic application of GIC on a daily compounding basis. This interest is periodically added to taxpayers’ accounts. The ATO is legally obligated to use any credits or refunds owed to taxpayers to offset outstanding debts, including those currently “on hold.”
While the ATO has discontinued referring debts to external collection agencies, the possibility of doing so for future debts has not been ruled out. Businesses are strongly advised to address their tax obligations promptly to avoid the escalation of debt collection measures.
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The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls WA before making any decision to discuss your particular requirements or circumstances.