The ATO’s View On Taxes Owed

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Tax Debt and the ATO

We are currently receiving many questions from our clients regarding the Australian Tax Office and their tax debt collection processes. There has been an increase in activity in the ATO's collection activities. Because of this, we thought it was worthwhile opening this discussion on our website. If you read on, you will understand the ATO's point of view on Tax Debt, the businesses involved and the ATO's collection process.

  • Micro/small businesses (turnover up to two million dollars) account for around two-thirds of the ATO's collectable debt.
  • Around 2,000 staff, across 17 sites, work in the debt management areas of the ATO.

ATO Point Of View:

The ATO has quite a large sum of outstanding taxes they are seeking to recover. As you see above, it is mostly from small businesses. This may change as they focus on large multinationals that have not been required to collect GST on their behalf until recently.

  • At the date of first publishing this post, collectable tax debt was $13.6 billion. This was represented by 1.22 million cases. Of this, there was approximately $8.4 billion of activity statement debt.  $4.7 billion of the total amount was unpaid income tax debt. The remaining amount was $345 million of superannuation guarantee debt and some sundry other debts too.

Speaking earlier that year, there was mention of a small business consultative committee set up by the ATO. Their task was to chase up unpaid tax debts. One of their main targets were businesses that the tax office had pushed to the edge of existence. He said that non-viable companies were one of the main targets.

"The ATO was pursuing these businesses because of the threat they posed to counterparts," Mr D'Ascenzo told BusinessDaily. "We have increased the number of bankruptcies and liquidations, where we are the one instigating it because - having [been offered] a lot of payment arrangements - some people aren't able to hold up their end of the bargain," he said.

"For some, there's a default, then another default, then there is another default."

"We say we are keeping [a] business alive that is maybe not viable and that undercuts other businesses in their industry who are viable."

It can be seen that the ATO is targeting businesses in some cases that might be viable, but have had a rough patch and are on the way back into profit. This can be hard for them to distinguish, without expensive personal involvement in many businesses that will plead viability.

The Tax Debt Collection Process:

Identified Stages:
  • Early intervention - telephone, letters, external collection agencies, SMS messaging.
  • Firmer action - garnishees, director penalty notices, statutory demands.
  • Enforcement - legal action, bankruptcy proceedings, company wind-ups.

The ATO uses various tools to assist in their collection and decision making. This includes an internal business viability tool. Its function is to assess a businesses capacity to function within their guidelines. They also have financial modelling tools to assess cash-based businesses, such as market stallholders and grocers. This tool can assess the income and expenditure based across other like businesses and present an estimate of the tax owed.

Each of the stages of the collection above has in its own right, a set of specified actions to communicate and recover unpaid taxes. The ATO has indicated that they will progress each stage if the business fails to meet arrangements or communicate a willingness to meet arrangements. The end result of non-compliance and payment would be bankruptcy and/or winding up the company/business.

Tax Debt Negotiation Help

If you are in this situation it is important to take fast action to rectify your liability to the tax department. This may be any or all of the following:

  • Initially, communicating with the ATO
  • Secondly, making a payment arrangement for the overdue taxes
  • Thirdly, paying ongoing tax liabilities
  • Fourthly, paying outstanding Tax Debts by asking for help with your tax debt.
  • Finally, consider using your home loan to pay your tax debt.

This is the sort of situation we work with every day. Our specialty is identifying how different business debt problems may be solved and when necessary, apply for tax debt finance or other business debt solutions.

Call Loan Saver Network to discuss your situation and the potential for a loan to clear your tax debt on 1300 796 850.

Let's talk about a solution that suits you