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ATO small business debt crackdown

ATO debt recovery on track but stronger and firmer action to come

ATOs Assistant Commissioner for Risk and Strategy in their Lodge and Pay business line, Anita Challen, confirmed strong progress made since March 2022 to reign in tax debt, but there is still more to be done.

The ATO’s debt recovery program follows significant growth in the ATO’s debt book as a result of the pandemic.

Post-pandemic, the ATO has progressively increased its debt recovery with a focus on engaging clients to make them aware of their obligations and supporting clients to manage their debt based on individual circumstances.

In addition to its engagement activities, since March, the ATO has sent 82,000 awareness notices to businesses and directors, with significant outstanding tax obligations with around one-third subsequently engaging with the ATO to attend to their obligations.

“We’ve taken every possible opportunity to increase awareness of our intention to recover debt and have seen relatively good engagement,” said Anita.

“In the last couple of months, we have seen more collection outcomes than we expected,” continued Anita. “We’re getting back on track but do recognise it will take some time to recover to a healthy debt book range.”

Of those who have not engaged, Anita confirms the ATO is working hard to strike a balance that respects the challenges businesses are still facing.

“We’re mindful that businesses have faced a lot of challenges over the last few years, and many are still struggling. We recognise that it is difficult for businesses to balance their books and at times need to make the hard decision to close their business.”

The ATO says bookkeepers play an important role by assisting their clients to understand their obligations and cashflow, and by encouraging them to keep lodging.

“We really need clients keep up to date with their lodgements. Without those lodgements we have less of an opportunity to understand the circumstance of clients and provide tailored help for those who need it.

“We have 20 per cent of our debt book under a payment plan. A genuine intent to engage with us offers us a chance to give businesses more options. Businesses who have smaller debts can even enter into payment plans online, which is another key point where bookkeepers can assist.”

For those businesses who have not engaged following an awareness letter, the ATO has issued more than 1600 intent to disclose notices and have disclosed more than 60 clients’ debts to credit reporting bureaus. The ATO has also issued more than 7000 director penalty notices (DPNs) which makes a director personally liable for certain business debts. On average, around 150 DPNs are being sent out each business day.

Anita concluded that it is never too late for a business to engage with the ATO.

“We will work with all businesses to tailor appropriate support and assistance that meets their circumstances.”

More information on how the ATO can help support you with tax can be found at we can support you with tax.

More information on ATO payment plans can be found at plans or call 13 11 42.

Small business owners and sole traders can also phone the Small Business Debt Helpline on 1800 413 828 (from 9am to 5:30pm AEST Monday to Friday) for free financial counselling support.

14 Dec 2022
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