In his April speech, the Commissioner discussed debt management needs of the ATO, stating that while a large majority of taxpayers meet their obligations in time, there are also a number who don’t and this causes a strain on the ATO.

Despite their increased efforts, the ATO has had an increasing amount of debt needed to be recovered, estimated at approximately $20 billion. The Commissioner said that the ATO has adjusted their approach to tax collections in regards to the following:

• Earlier intervention methods will be taken in order to prevent debts from escalating beyond the taxpayer’s control – connecting with people in order to ensure that they are able to make regular repayments so that their debt does not become unbearable.
• Increased focus on business viability and ability to meet future obligations.
• Legal action will be taken earlier than warranted. That is, bankruptcy and wind-up action will be initiated if there is any evidence of the taxpayer becoming insolvent. As well as this, alternative statutory powers will be utilised where businesses have failed to make employee superannuation contributions, or pay amounts held in trust.
o In previous years, the ATO have waited until the taxpayer’s debts have escalated to $300,000 before initiating bankruptcy. For comparison purposes, the average creditor usually waits until debts reach $35,000.
o For corporate companies, the ATO have previously waited until their debts have reached $340,000, compared to creditors whom initiate bankruptcy after around $93,000.

Ref: ATO website – Commissioner’s Speech to the Tax Institute

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.