ATO focus on 5 key areas of business debt
The ATO's recent speech emphasizes the need for a return to normal operations and a focus on timely tax payments after the leniency shown during the COVID-19 pandemic. The speech outlines Australia's strong tax compliance culture and the challenges faced in shifting from debt collection to stimulus payments. The ATO reveals an alarming increase in collectable debt over the past four years, reaching $50.2 billion by June 2023, with small businesses accounting for a significant portion at $33 billion.
The speech identifies five key areas of focus in the ATO's debt collection reset:
1. Unpaid Super Guarantee Charge (SGC)
The ATO is targeting the $1.8 billion owed in unpaid Superannuation Guarantee Charge, particularly emphasizing small businesses' responsibility to pay employees' superannuation on time. Stringent actions, including garnishee notices and prosecution, will be employed to ensure compliance.
2. New Self-Assessed Debts Raised by Employers
Businesses with new self-assessed debts are under scrutiny, with the ATO urging immediate action. The upcoming Payday Super initiative reinforces the need for businesses to adjust to real-time tax payments.
3. Refund Fraud
The ATO is intensifying efforts against refund fraud, emphasizing severe consequences for engaging in fraudulent activities. Stronger powers, including departure prohibition orders, will be applied to recover debts related to fraudulent behaviors.
4. Major, Aging Debts
A focus on aged, high-value debts exceeding $100,000 or overdue for more than two years is outlined. Concessions for these debts are eliminated, and recovery actions will be accelerated, including legal proceedings for insolvency.
5. Debts Resulting from Audit Actions
Debts arising from audit actions, especially those stemming from careless or deliberate actions, will receive no concessions. The ATO is committed to enforcing payment and addressing liabilities raised through a range of actions.
The speech underscores the importance of tax professionals in shaping a positive payment culture. While acknowledging the challenges faced by businesses, the ATO urges early engagement, emphasizing that waiting for the ATO to chase payment after the due date may lead to limited concessions. The ATO is returning to normal debt collection practices, applying firmer actions and escalating legal proceedings, as necessary, to protect the Australian community and ensure a level playing field for compliant businesses.
The ATO also highlights its commitment to supporting businesses through the Small Business Restructuring (SBR) process and urges tax professionals to advise clients experiencing financial difficulties to explore available options. The speech concludes by acknowledging tax professionals' role as cultural touchpoints and emphasizes the collaborative approach needed to shift payment behaviors for the benefit of the Australian community.