The ATO has sometimes been slow in taking steps to recover debts owed to it. But it is now being more aggressive in taking action to recover this debt.
In this article we look at why the ATO is aggressively pursuing recovery action, what strategies they’re using to recover tax debt, and what you can do if you owe unpaid or unpayable tax.
Tax debt: Why is the ATO getting more aggressive?
As of the end of 2017:
- Approximately 1.7 million taxpayers owed debts to the ATO, including individuals and companies;
- The ATO was owed over $21 billion in tax, which it deemed to be collectable, nearly $14 billion of which was owed by small businesses.
These figures have actually increased since the end of the global financial crisis, meaning individuals and businesses continue to accrue tax which they cannot pay when due.
ATO strategies for recovering tax debt
We have found that, in the last 12 to 18 months, the ATO has been more aggressive in pursuing recovery action in respect of outstanding tax debts.
Strategies for recovery include the issuing of:
- Director Penalty Notices to company directors for outstanding PAYG Tax and superannuation;
- Garnishee notices in respect of both companies and individuals;
- Liquidation or bankruptcy
We’ve also found that the ATO has taken a very hard-line approach in negotiating terms of payment arrangements.
This is particularly the case where taxpayers are significantly behind in lodgement obligations or in making required payments and have not been proactive in dealing the ATO. In these types of situations, as part of any payment arrangement, the ATO is likely to:
- Want an initial lump sum payment, sometimes of a substantial amount;
- Want the tax debt paid over a shorter period of time than previously – commonly within 12 months;
- Not agree to waive any general interest charge or penalties; and
- Be very aggressive in pursuing recovery action if a payment arrangement is not agreed to or is breached.
What you need to do to protect yourself or your business
Have you got a tax debt that you’re concerned about?
If you’re unable to meet your business or personal tax liabilities, the worst thing you can do is to skip lodgements when they fall due in the hope that the ATO will not chase you because they don’t know the amount of unpaid tax you owe. This is because ATO is still prepared to work with taxpayers, but it is easier to deal with the ATO if you have made required lodgements on time and then been proactive in contacting the ATO to negotiate a payment arrangement or even multiple payment arrangements.
Get in contact with us
We are experts in providing advice regarding tax debts and in dealing with the ATO. So if you have an outstanding tax debt and/or are facing problems with a business or company you trade, urgently get in contact with us for a free, no obligation discussion.