Government ‘unfairly’ refuses to refund on-hold debts paid to ATO
The Greens say the government has “shafted” the 7,000 taxpayers who complied with the Tax Office's controversial campaign.
Around 7,000 taxpayers complied with the Tax Office's controversial on-hold debt recovery campaign but none will be refunded under the government's proposed reforms, officials say.
The reforms, announced in the federal budget following backlash against the ATO, would give the Commissioner discretion to not use a taxpayer’s refund to offset old debts put on hold before 2017.
But during a Senate Economics Legislation Committee hearing on Tuesday, the government said extending that discretion to reimburse taxpayers who already repaid their on-hold debts “was not going to be possible”.
“Individuals make choices about the payment or non-payment of debts,” Finance Minister Katy Gallagher said.
She said it would be "extremely unusual" to refund debts paid to the Tax Office.
“Debts exist across the tax system, and they are important. It's a fundamentally important part of our tax system that if you have a tax debt, you pay that back.”
It comes despite the ATO acknowledging their suspended campaign was “confusing” and revealing that around 7,000 taxpayers paid $1 million in response to the letters.
“Our communication about historical debts placed on hold was confusing and we apologise,” ATO Commissioner Rob Heferen said.
“The community can rightly expect us to communicate and act with sensitivity, compassion and sound judgment.”
“At the time, people thought they were doing the right thing. There was some miscommunication, we've reverted, we've kept the situation as it was, we've put in place the status quo.”
Greens senator Nick McKim said the 7,000 Australians “intimidated by a confusing piece of communication into paying a debt” were being penalised and “shafted by the government” compared to those who stood to benefit under the proposed reforms.
“If you’re going to bring in legislation that is going to provide discretion to the ATO not to pursue some of these debts, it would be manifestly unfair for you not to apply that same discretion to people who pay the debt, after having received a confusing communication from the ATO for which they've apologised,” he said.
Internal documents obtained by Guardian Australia showed the ATO sought to raise as much as $15 billion by resurrecting old debts previously deemed uneconomical to pursue.
The campaign involved the sending of thousands of letters to taxpayers and tax agents listing the sums without containing further details of their origins, meaning many would be impossible to verify or take “days of reverse workflow”.
The debts disproportionately impacted financially vulnerable individuals without access to tax advice, according to policy experts.
While the ATO argued the practice was required by law, it paused the campaign in February following community backlash, with the government proposing reforms in May’s budget.
As it currently stands, however, the discretion to not offset debts will only apply to small businesses, individuals and not-for-profit entities with current liabilities.
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