Now that the JobKeeper scheme has concluded, the Australian Tax Office has announced that it will resume pursuing and enforcing debt recovery action.
In February, the ATO commenced sending letters to taxpayers to inform them of potential sterner action if they failed to make good on their obligations and had refused to get in touch with the Tax Office.
Last year during the peak of the covid-19 pandemic the ATO paused its debt, audit and lodgement work. This contributes to a $1.3 billion shortfall against its compliance revenue target.
The ATO has stated that now that March has ended the imposition of penalties will resume and one a case-by case basis, the ATO will be taking debt and lodgement compliance actions.
The ATO believes that it is important for them to recommence their service as they now have a huge $53 billion debt book to account for. It was therefore expected that the ATO would introduce stronger enforcement once JobKeeper was ended.
Despite this, the ATO has assured practitioners and their clients that firm action will not be taken if they reach out for help.
The ATO understands that the bushfires from 2020, covid-19 or the floods which occurred more recently may continue to have a significant impact on taxpayers and tax professionals. “The ATO will always provide help and assistance to anyone who engages with us”.
“We will generally not take compliance action where we are aware you are trying to do the right thing” said a spokesperson for the ATO.
Due to the current economic conditions it is understandable why the ATO is wishing to return to business-as-usual activity to prevent debt issues from snowballing.
It is important for business owners who are currently experiencing this type of situation to get on the front foot, and when they get those debt letters, communicate their circumstances, and then look at the available options that the ATO provides.
It is also important for the ATO to understand the circumstances that some of their client find themselves in, and we have been reassured that they will find a tailored approach.
The ATO might be unaware of financial circumstances of a business, if they are in an industry that has been severely damaged by the covid-19 pandemic or if they are business as usual and have the capacity to pay. They might know a little bit about the industry, but they may not know about the particular circumstances of the client, so it is vital for business owners to clearly communicate with the ATO what their current situation is like.
It is important for clients not to ignore letters from the ATO and it’s important for accountants across the country to talk to the ATO about their client’s current position.
If an accountant or any of the accountant’s clients have overdue obligations or are worried about compliance action, it is vitally important to get in contact with the ATO so they can work with you to find a solution to your current problems.
Chartered Accountants Australia and New Zealand has also said that while the ATO’s confirmation highlights the importance of getting clients to re-engage with the Tax Office, the reality of current economic conditions might pose issues for practitioners.
“You can urge clients to get their tax affairs up to date, but some clients are in deep financial distress and are unwilling to do so or can’t pay their accountant, so it’s an interesting time for client engagement”.
“There are some opportunities here, however, and that’s particularly the loss carry-back tax offset, and a lot of good accountants are trawling through their client list at the moment to identify clients likely to be eligible for that and encouraging them to lodge quickly. The offset is a handy leverage to get your corporate clients to engage if they have outstanding tax returns” said a spokesperson for Chartered Accountants Australia and New Zealand.
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