The ATO has throughout the Covid-19 pandemic sought to work with businesses and minimise any times of recovery action. The aim of this approach was to support businesses through what was an extremely difficult time.
Commissioner of Taxation, Chris Jordan stated in regards to this approach, midway through 2020:
“We know that many businesses and communities are being heavily affected by the challenging economic conditions created by the outbreak of COVID-19. The ATO will work shoulder-to-shoulder with businesses to assist them through this difficult period and do what we can to ease the pressure. Once you contact us, we’ll tailor a support plan for your needs and circumstances.”
Total tax debt has now grown
However, total tax owed in Australia has now reached nearly $55 billion, with nearly $40 billion of this being seen as collectable. This collectable tax debt has significantly increase from pre-pandemic levels of around $24 billion.
What is going to happen?
The ATO has to seek recovery of this outstanding tax debt at this stage. And that is what is beginning to occur. The ATO is starting to target recovery and enforcement action at certain groups of taxpayers, but at this stage that is mostly limited to taxpayers with large tax debts, taxpayers who are not engaging with the ATO and businesses which owe unpaid superannuation. An ATO representative has recently explained this approach as follows:
“These enforcement actions will be prioritised for those clients representing higher risks and refusing to engage. Our initial focus will be on taxpayers with higher debts before including taxpayers with all other debts in the new calendar year. Taxpayers with Superannuation Guarantee debts may be prioritised irrespective of their debt value.”
What type of recovery action will the ATO take?
At the moment it appears as though the ATO are taking steps to contact taxpayers and their representatives and seek to negotiate payment arrangements and/or the making of outstanding lodgements. For taxpayers who fall into the categories mentioned above who do not engage with the ATO there is a risk that the ATO could take other forms of recovery action including:
- Issuing director penalty notices which can make directors liable for some company tax debts;
- Issuing garnishee notices which can take money out of bank accounts or compel debtors or other parties to pay the ATO;
- Referring tax debts to credit reporting agencies; and
- As a last resort, placing companies in liquidation.
What can you do if you have a tax debt you can’t pay?
The best thing you can do is speak to a professional. A qualified professional will be able to review the financial affairs of your business and provide you with options to deal with your tax debt, including negotiating a payment arrangement with the ATO.
Contact us for assistance
At Pearce & Heers, we have had experience providing strategies to deal with the ATO for more than 20 years. Our aim to is to assist businesses in dealing with debts before it is too late. If you have unmanageable debts, contact our Brisbane or Gold Coast Offices for a free no obligation discussion about your circumstances.
