With the Tax Office recently shifting its approach to tax debts following the end of the pandemic, businesses are now being forced to rethink how they manage these debts.

Whilst the ATO had a more relaxed and supportive approach to debt collection during the COVID-19 period, since the middle of last year, the ATO has accelerated its activities in this area. It has also warned tax professionals and businesses to readjust expectations around payment plans as the ATO seeks to claw back $52 billion in tax debt, based on data from April.

There is still an expectation that long-term payment plans (up to 3 years) can be arranged, but this is no longer the case. Most payment plans now span 12 months or 18 months maximum. The ATO are now taking the view that a payment plan isn’t there as a loan. It’s not there for businesses who actually can pay and lodge on time to help them keep that money in their account.
 

Small businesses account for the majority of the $52 billion owed to the ATO and many companies are only really starting to action these liabilities now.

The Tax Office has some really powerful tools in its arsenal to collect the money owing to them, including garnishee notices where the ATO can essentially tell your customers not to pay the company and to pay the ATO instead. They are also putting pressure on company directors, issuing 18,343 director penalty notices relating to 13,454 company liabilities in the 2023–24 income year

Engaging early is the key. The ATO is scrutinising the businesses that owe money and those that engage with them and make an effort to deal with the situation and the liability will be treated better than those who just didn’t listen. These debts don’t just disappear, and in fact grow due to the % interest rate that these debts attract.

Do you have an ATO debt that is causing you stress? If you don’t wish to directly engage with the ATO, talk to us. We can liaise with them on your behalf and hopefully set up a payment plan to get you back on track and off the ATO radar!