The Australian Tax Office (ATO) has confirmed that it has recommenced pursuing and enforcing debt recovery. However, the tax agency has reassured businesses that it will refrain from going too hard too soon.
Businesses who are struggling with tax debts have been encouraged to re-engage with the ATO as it promises it will not “destroy the very thing that it has been trying to support” throughout the pandemic.
The ATO has contended that the engagement is relatively a soft form of engagement and they understand that it is very difficult for a business to go from paying nothing to suddenly finding themselves having to make a full payment.
The ATO says that they “are expecting a lot of payment plans to really try to get businesses gradually back fully into the system”.
However, at the same time the ATO doesn’t want to support businesses or companies all the way through a pandemic and “then by dialling debt collection up too quickly, we destroy the very thing that we’ve been trying to support.”
The recommencement of debt collection activity comes after the ATO paused its debt, audit and lodgement work at the peak of the covid-19 pandemic in 2020. As a result of the freeze on debt work the ATO currently has a debt book which has grown by over $20 billion.
“We turned off debt collection, we turned off lodgement chasing up, we really dialled back almost to no new audit activity, and gave taxpayers the opportunity to say, ‘Do I want to pause my existing compliance activity, continue it or slow it?’, so we really tried to put that in the hands of the taxpayer.”
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.
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.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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