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A collection of updates, articles and papers written by The Little CFO & The Little CFO Legal

ATO & debt collection leading into 2023 FY

May 2022: ATO announces prioritising support and assistance for debt collection efforts, and issuing DPNs and Business Tax Debt Disclosures notices.

Starting point: Engagement with the ATO is key

The Australian Taxation Office (ATO) has issued a media release stating that the ATO’s preferred approach is always to work with taxpayers to resolve their situation through engagement rather than enforcement.

ATO Deputy Commissioner Vivek Chaudhary highlighted that "What is critical is that taxpayers or their representatives talk to us and respond to our calls.”

What happens if taxpayers fail to engage with the ATO?

The ATO warns it is taking firmer actions where taxpayers fail to engage. These actions may include:

  • garnishees;

  • recovery of director penalties;

  • disclosure of business tax debts; and

  • legal actions - such as summons, creditors petition, wind-up and insolvency action.

Who will have the ATO's focus?

Higher debts & failing to engage

According to the ATO, its debt collection activities "...prioritise those taxpayers representing higher risks and refusing to engage. That is why our initial focus will be on taxpayers with higher debts before including taxpayers with all other debts."

Super Guarantee debts

It is important to note the ATO's position that taxpayers with Superannuation Guarantee debts "may be prioritised irrespective of their debt value. This is because the Superannuation Guarantee is an entitlement that is owed to employees.”

Insolvencies expected to rise

The ATO also acknowledged that it expects a number of insolvencies to occur over the coming months as the economy normalises.

The ATO's next steps

For those taxpayers who have not responded to calls and letters, have significant tax obligations outstanding, and are not engaging, the ATO is proceeding with issuing 'Director Penalty Notices' and 'Intent to Disclose Notice' for business tax debts:

Intent to disclose business tax debts
  • The ATO has issued nearly 300 intent to disclose notices and has commenced disclosing some of these to Credit Reporting Bureaus Equifax and Creditor Watch.

  • The ATO sent 29,552 awareness letters for disclosure of business tax debts.

Director Penalty Notices
  • The ATO is currently issuing 30–40 Director Penalty Notices each day for companies with outstanding obligations, and expects that to increase.

  • The ATO sent 52,319 awareness letters about the use of Director Penalty Notices.

According to the ATO “Both programs focus on making taxpayers aware of their obligations, the actions we may take, and provide clear pathways for taxpayers to re-engage, work with us, and avoid escalation. As part of this approach, we will continue to offer support to help taxpayers meet their obligations.”

What is the ATO's position if a formal dispute is underway?

Whilst all debts remain due and payable, the ATO stated that it does not generally undertake debt recovery action on small business debts during a formal dispute.

Read the full ATO media release here.


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