ATO signals tougher approach on tax debt recovery
The Tax Office will dramatically increase its use of credit referrals and director penalty uses as part of stronger approach to recover billions in collectable debt.
The office plans to send out 50,000 intent-to-disclose notices this financial year as it chases billions owing, its corporate plan for 2023-24 has revealed.
The ATO said it will dramatically increase its use of credit referrals to issue about 2,500 this financial year as part of “stronger actions” to recover billions in collectible debt and improve the tax performance of small business.
It will also make more aggressive use of director penalty notices as it tries to reel in around $45 billion in debt, two-thirds of which is owed by small business.
Collectible debt and a better tax result from small business were named as two of the top priorities in the ATO’s 2023-24 corporate plan released last week.
Presenting the corporate plan to staff, Commissioner Chris Jordan said it was “the final chapter of our Towards 2024 journey and the path forward for the future”.
He also confirmed it marked his final few months in the role and he would leave when his second five-year term finished at the end of next February.
The corporate plan confirms the ATO will take a more aggressive stance on outstanding amounts owed “by exercising firmer debt collection actions when appropriate”.
Figures supplied by the office revealed that its more aggressive campaign had already begun, with 23,246 DPNs issued last financial year and 1,556 since 1 July.
“Currently, we are issuing an average of 60 DPNs a day,” the ATO said in response to a request by Accountants Daily.
“There has been an increase in the number of DPNs issued to directors of companies who aren’t paying their debts, and this is expected to continue.”
The ATO is now understood to be issuing DPNs to directors whose companies have failed to make PAYG, GST and super guarantee payments without prior warning, adopting a tougher line than last year when it resumed its debt collection activities following the pandemic.
But a big part of the stronger enforcement strategy involves an increasing reliance on the ATO’s relatively new weapon of credit referrals, which it wields against businesses owing $100,000 or more which persistently refuse to manage the debt.
The facility allows the tax office to disclose the debt to registered credit bureaux, including CreditorWatch, Equifax and Illion.
The ATO said it would dramatically increase its use of credit referrals from last year’s figure of 867, which were dispatched to businesses owing a total of $1.2 billion.
“Since 1 July 2023, 136 businesses have been disclosed to credit reporting agencies,” the ATO said, equivalent to more than six every business day.
“In FY2023-24 we expect to issue over 50,000 intent-to-disclose notices that may lead to over 2,500 businesses being subsequently disclosed.”
The projected figure of 2,500 amounts to almost 10 every business day and almost triple last year’s total in what the ATO said was the final phase of a three-stage debt disclosure strategy.
“The significant increase in the intent to disclose notices in FY2023-24 reflects approximately 20,000 old debts that met the criteria before December 2022, in addition to all new debts expected to meet the criteria in this financial year,” an ATO spokesperson said.
“As at 30 June 2023, there was over $5 billion of debt being addressed through the disclosure of business tax debt measure. This is expected to increase significantly this financial year as we would have issued notices to all eligible debts.”
The corporate plan confirmed the ATO would “take decisive and swift action with those who are choosing not to engage and clients who purposefully avoid payment obligations”.
Key deliverables included:
“Apply differentiated strategies and targeted interventions to address
collectable debt.”
“Optimise allocation of effort to strengthen debt prevention and recovery,
including expedited stronger actions for clients with capacity to pay.”
Also on the corporate plan to-do list were multinational tax performance – a government priority – as well as protecting against cyber crime and fraud, super guarantee non-compliance, modernising the business registers and stepping up investment in data and digital systems.
Mr Jordan said the plan should guide the actions of staff in their daily activities.
“We are a big organisation with a lot of moving parts, so it’s important you take the time to understand where your work fits in, what the plan means for you, and how you contribute to it,” he said.
“It should act as a guiding light – to give you the why behind what you do every day.”
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