ATO Debt: Collection Measures to be Bolstered

For many businesses inflation and rising interest rates have made trading difficult in recent years.  Cash flow is a problem and the ability to pay taxation liabilities on time is becoming even more of a challenge. 

At the same time, the ATO is continuing to reinforce its message of tougher debt collection to reduce the growing ATO debt book.  We are constantly hearing of examples in which the ATO payment arrangements that may have been acceptable in the past are no longer being considered and an increasing number of Director Penalty Notice’s (DPNs) are being issued.

The ATO’s focus on debt collection was reinforced once again in an address to the Tax Institute’s Tax Summit 2024 (12 September 2024).  In his speech, Rob Heferen, the Commissioner of Taxation, confirmed that the ATO’s collectible debt is now over $50 billion and reducing that debt was a priority.

 “It’s the largest it’s ever been, and it’s money that could be benefitting all Australians.

“You can expect that [the ATO] will be firmer and faster in dealing with unpaid GST, PAYGW and super. [The ATO has] also tightened up on payment plans and general interest charge remissions, and will be looking closely at lodgement deferrals and penalty remissions…”

Does Your Business Have an ATO Debt?

If your business is struggling or experiencing financial distress it can be overwhelming to determine the best way forward.  In the current climate, the payment of ATO liabilities on time (and preventing the accumulation of an ATO debt) is always in your best interests. 

However, if you are unable to pay the amount outstanding, it is imperative that taxation liabilities still continue to be reported on time.   By ensuring you comply with your relevant reporting obligations, you can at least avoid being issued with a lockdown DPN by the ATO that leaves you with no other option but to pay the debts personally. 

You should also engage with the ATO to explain your circumstances as a matter of priority. The earlier you engage with the ATO, the more likely the ATO will agree to providing you with more time to pay, entering into a payment plan, or remitting penalties and interest. 

Seek Professional Advice

If you think you may be at risk of not being able to pay outstanding tax liabilities, contact the team at Smith Hancock for advice.  We can explain the options available and guide you through any necessary actions to help keep your business operating and avoid the risk of personal liability.

The full speech from the Commission is available on the ATO’s website - https://www.ato.gov.au/media-centre/commissioners-address-to-the-tax-institutes-tax-summit-2024