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ATO’s $50 billion crackdown on tax debts

The ATO has issued a warning for Aussies falling behind on their tax obligations, as it chases billions in outstanding debts.

The Australian Taxation Office (ATO) is cracking down on the more than $50 billion of debt that has gone unpaid by taxpayers, including more than two-thirds that is owed by small businesses.

The tax office returned to its normal debt collection in December, after giving taxpayers some breathing room during the pandemic.

ATO commissioner Rob Heferen said ensuring taxpayers pay their tax and super obligations was now a “key focus” for the agency.

Australian Taxation Office (ATO) sign and Australian money.
The ATO is chasing up billions of dollars in tax debts and has a “critical” message for these Aussies. (Source: Getty/AAP)

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Speaking at a national small business summit today, Heferen revealed a significant portion of the amount going unpaid was GST collected from consumers or pay-as-you-go (PAYG) tax instalments withheld from employees' pay, that has not been handed to the tax office.

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“We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable,” Heferen said.

“It’s critical that all employers – big and small – keep on top of their obligations to their employees first and foremost, as well as their obligations to government in respect to GST, income tax, and other taxes.”

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Heferen said 65 per cent - or about $32.5 billion - of outstanding tax debt was owed by small businesses and 74 per cent of that figure - about $24 billion - was related to their activity statements.

Calls for interest to be wiped on old debts

The ATO has also been trying to claw back $15 billion in historic debts from 1.8 million entities, who are largely individuals.

Thousands of Aussies were sent letters late last year alerting them to historical tax debts, with amounts ranging from as little as a few cents to thousands of dollars. In some cases, the debts are more than decades old and taxpayers say they don’t know how or when they were accrued.

The Commonwealth Ombudsman and Taxation Ombudsman have criticised the ATO’s approach to re-activating old debts, stressing the importance of government agencies being “transparent and accountable” when notifying people of unpaid debts.

Tax Ombudsman Karen Payne is calling for interest to be wiped from very old debts.

“If the debt is very old and you haven’t been advising taxpayers that it exists, then it would seem fair to me that any interest component should be remitted, which is effectively waiving it,” Payne  told ABC RN Drive this week.

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