Summary

The ATO has ramped up it’s post-COVID debt recovery with the latest tool being the disclosure of tax debts to credit reporting agencies. The takeaway message, proactively engage with the ATO. 

In Detail

As at 30 June 2021, the ATO had $24.3 billion of collectable debt from small businesses up $7.8 billion from the same time in 2019. During COVID, the ATO relaxed it’s debt collection activities, however, now that the economy is in recovery mode, the ATO has stepped up its efforts to collect this debt.

The ATO has always had several tools to collect unpaid debt including garnishee notices, director penalty notices or procedures to wind up the entity. They’ve now added another tool to the chest…disclosure of tax debts. 

Where your tax debt is more than $100,000 and has been overdue for more than 90 days, this debt may be reported to credit reporting bureaus unless you repay the debt or engage with the ATO and enter a payment arrangement. Businesses that fall into this category are likely to receive (if they haven’t got it already) a notice from the ATO given a 28 day heads up that their debts will be disclosed.

Most small businesses will have debt below $100,000 so this new measure won’t impact most businesses. However, this is evidence of the ATO ramping up their debt recovery and so, regardless of the amount of your debt, it’s important that you proactively engage with the ATO to avoid any of these debt recovery actions. In our experience, if the communication lines are open, you can generally get a favourable payment plan with the ATO (or if you don’t call back and get a different ATO officer!).

If you’re having issues with ATO debts, reach out to the team at Day One Advisory to help negotiate a payment arrangement with the ATO.