The Australian Taxation Office (ATO) is intensifying its campaign to reclaim more than $50 billion in overdue tax debts, with a substantial portion of this debt—over two-thirds—attributable to small businesses. This includes GST revenue from consumers and PAYG tax installments from employees’ salaries that have not been remitted to the tax authority.
Post-pandemic, the ATO has reinstated its standard debt recovery operations as of December. The Commissioner, Rob Heferen, has declared that the ATO’s main concern is to ensure that all taxpayers fulfill their tax and superannuation responsibilities.
At a recent national small business conference, Heferen pointed out the increasing trend of businesses not keeping up with their tax payments. He stressed the vital role that fulfilling tax obligations, including GST, income tax, and other levies, plays in the financial health of businesses.
Small businesses are the source of roughly 65% of the total outstanding tax debt, which equates to about $32.5 billion, with 74% of this figure stemming from activity statements. In addition, the ATO is pursuing the recovery of $15 billion in long-standing debts from nearly 1.8 million entities, mainly individuals.
In the previous year, numerous Australians were notified of their historical tax debts, which varied from small to significant amounts accumulated over many years. The Commonwealth Ombudsman and the taxation Obudsman have crticise the ATO’s method of reactivating dormant debts. Moreover, they called for greater clarity and responsibility in the process of debt notification.
Karen Payne,the Tax Ombudsman, has suggested that interest on very old debts should be waived. She believes that forgiving the interest on such debts would be a just approach.
