We’ve been tracking the Australian Taxation Office's (ATO) approach to debt collection for a while. And as we head into 2025, things are tightening up even further.
The ATO’s 2024-25 financial year strategy made debt collection a top priority, stating it will use ‘firmer and stronger action’ when dealing with businesses that have outstanding obligations.
The areas of focus include businesses’ superannuation guarantee, pay-as-you-go withholding and GST liabilities.
These firmer actions include sending external debt collection agencies much earlier and more frequently than before.
We have an example of a client with a clean record whose September BAS debt was sent to collections after just two attempts by the ATO to secure payment.
It was also recently reported that Australians were getting automated messages from ATO debt collection during the festive season, chasing them for payment on overdue tax debts from years ago.
Last year, unpaid ATO debts had climbed to over $52.8 billion by 30 June 24, with small businesses making up more than half of that total. This is a substantial rise from the $26.4 billion at the end of December 2019.
The reason for such a jump can largely be put down to COVID and the various stimulus measures and financial support provided during that time.
However, even though the pandemic is over, many businesses are still facing financial hardship due to the ongoing challenges of the cost of living crisis. For some, an ATO demand could be the breaking point.
Recent Australian Securities and Investments Commission (ASIC) data revealed a 47% increase in insolvencies in the second half of 2024, with industries like construction, accommodation, food services, and ‘other services’ being particularly hard-hit.
While the ATO acknowledges that chasing payments now may not be ideal, they have government deficits to meet.
Because of the ATO’s increasingly tougher action on unpaid debts, it’s more important than ever that you communicate with us or the ATO if you can’t make lodgement or payment deadlines.
Reaching out promptly positions you to be on the front foot with the ATO, avoid repercussions, including legal action such as a director penalty notice (DPN), and retain control of your financial situation.
You also need to ensure you’re getting your records to us in a timely manner so we can ensure no lodgement deadlines are missed. The ATO is becoming stricter with late lodgement penalties, and even if you’re unable to pay your debt immediately, lodging on time can help minimise additional costs. Unfortunately, we’re no longer seeing success getting penalties and interest remitted.
Speaking to the Accounting Times recently, the ATO said:
“We will support clients who are engaged and get them back on track. We will take decisive and swift action with those clients who make the choice not to engage and who purposefully avoid payment obligations.”
It’s important to take this seriously.
Struggling to meet your ATO lodgement or payment deadlines and/or have existing business tax debt? Reach out to your Maxim advisor or contact our team today to obtain professional advice.