In the last 6 months we have seen a much tougher stance from the ATO regarding how they collect debts. Payment plans are hard to get and they are not refunding any interest charges (currently 11.15%) or late lodgement penalties. There has also been a large increase in audit activity. Essentially the ATO have gone from flexible and understanding to a more enforcement type approach. They are willing to go legal too, we had a payment plan denied the other day where we said to the ATO “well obviously the client can’t pay the BAS/debt in full, otherwise we wouldn’t be calling you, what do you expect the client to do?”, their response was “the client has collected this government revenue (GST and PAYGW), if they cant pay it, we will just go to legal enforcement to recover the debt, we will give you a 2 week extension that’s all”.
A great insight into their approach was their speech to the accounting profession at the Tax Summit on Sep 7th. See link here Addressing collectable tax debt – Tax Institute’s Tax Summit 2023 | Australian Taxation Office (ato.gov.au)
Here are a few excerpts:
“Collectable debt has increased over the past 4 years from $26.5 billion in June 2019, to $50.2 billion by June 2023 – this is an 89% increase and a trend we need to turn around. This is the collectable debt for businesses, which account for 90% of the total collectable debt. A vast majority of this debt is self-reported by businesses themselves. Small businesses continue to be over-represented in our debt book, owing over $33 billion of the $45 billion of collectable debt owed by all businesses.”
“Those who pay late or do not pay and do not proactively engage with us will have interest and penalties apply to their debts. We do not want clients to rely on remissions and will consider them only in very limited circumstances. Clients who make a choice to contact us early, will be best placed to discuss options that are available. And early means before missing the due date. Those who wait for us to chase payment after the due date can expect a different experience, with very limited room for concessions. For many businesses, the most effective payment plans will put them back to square before their next reporting cycle – ensuring they are back on track before new debts accumulate. This means for the majority, shorter repayment periods of 90 days to 12 months.”
“Taxpayers contacting us can expect a conversation about making payment in full and if this is not possible, we will assess their capacity to pay so we can determine an appropriate and manageable payment plan that is finalised in the shortest possible time. We recognise that this will present challenges for some businesses who continue to face pressures resulting from higher costs of living and interest rates. Interest remission requests will be assessed on case-by-case basis, considering exceptional circumstances and specific factors contributing to inability to pay.”
It is an annoying burden that the government asks small business to run a large part of the tax collection system for them (via BAS) and also the country’s retirement plan (via compulsory super), but I don’t expect this to change anytime soon. We are always available to assist you with this area, please just try and contact us before you default.