The ATO is generally known to be Australia’s largest ‘creditor’ – in other words a huge number of people owe the ATO money at any point in time. Recent data suggests that after going easy during the pandemic, that figure has jumped up to around $55 Billion now owed by individuals and companies across the country. The ATO is responsible primarily for collection of PAYG instalments, GST, Income Tax and unpaid company superannuation.
Being the country’s largest creditor, you would also expect the ATO to take more recovery actions than anyone else to collect those debts, and this is generally the case. However, recent data around the insolvency market place has highlighted how significantly the ATO has slowed down it’s activity to chase outstanding debts during the Covid-19 pandemic.
Generally the ATO would pursue around 125 to 150 companies per month into liquidation, by issuing Statutory Demands and chasing them through the court system for the unpaid debt. In the period since the start of the pandemic that would normally have been over 2000 company wind ups. The actual number of ATO wind ups in that time per latest reports – was about 7!
Similar but less accessible stats are also to be expected in relation to pursuit of debts owed to the ATO by individual taxpayers.
Will the ATO walk away from this significant sum of money currently owing to it? That surely is highly unlikely!
When will they start getting more aggressive to collect what is owed? That is the big unknown!
If you have an outstanding ATO debt, what should you do? That is the million dollar question!
We advise hundreds of people with tax debts on how to handle their particular situation. Every case is different, so seeking specific advice is highly recommended. There are so many technical tricks and turns when dealing with the ATO that we can’t event scratch the surface in this post, but suffice to say, extreme caution is required! The ATO's powers to make a company director personally liable for a company’s debt (director penalty notices), it's ability to freeze funds in your bank accounts (by garnishee orders) and their propensity to unexpectedly snaffle your personal tax refunds for years to come, are all powerful tools in their arsenal to get back what is owing.
In addition, in late 2019 the ATO picked up a power to report outstanding business debts of more than $100K to credit reporting agencies. This could be highly disruptive to a small business which is reliant on trade credit from its suppliers to continue to operate. Word on the street is the ATO has begun to issue warnings to some small businesses that they will soon be using this power and reporting these outstanding debts if the business doesn’t immediately start ‘engaging’ with the ATO…
Certainly, common sense would suggest that the ATO really does need to get active in collecting debts as we look ahead to 2022 and lockdowns are all but ended. The above stats certainly highlight they have a fair bit of catching up to do! So if you have an unpaid tax debt, keeping a close eye on ATO activity over Christmas and into the new year would certainly be highly recommended.
Our best advice if you have an unpaid ATO debt? Talk to an expert, soon!
From your accountant, to someone like us who deal with these situations every day. Speak to someone with expertise early, as delay can see things happen which can not be easily reversed. ..
We happily provide free initial consultations in this area, with no obligation!
Give us a call, or send us a message now if you would like to chat...