Small business collectable debt ‘slowing down’, says ATO
The growth in collectable debt among small businesses is slowing, but too many businesses are still deprioritising payments of tax and super obligations, the Tax Office said.
The ATO said the amount of small business collectable debt is now starting to slow after seeing a significant increase in recent years.
Prior to the COVID-19 pandemic, small business collectable debt was measured at $16.6 billion and has now reached $34.3 billion in 2023–24.
Despite this significant spike, the ATO said this climb in collectable debt is beginning to slow with the small business collectable debt amount only seeing a small uptick this year from $33.4 billion in 2022–23.
However, businesses that are capable of paying their tax debts are still choosing to deprioritise this payment, according to the Tax Office.
ATO Assistant Commissioner Rob Thomson said if a business is able to pay their tax debts, they are recommended to do so rather than ‘holding off.’
“The growth of collectable debt is slowing down and the ATO recognises that the majority of small businesses do the right thing with almost 80 per cent of liabilities owed by small businesses paid on time and in full within 90 days,” he said.
“However, too many small businesses who have capacity to pay are choosing to deprioritise payment of their tax and super obligations.”
The ATO said most collectable debt is owed by businesses and is self-reported business activity statement debt.
This is comprised of tax withheld from salary and wages, GST, superannuation guarantee, and pay-as-you-go withholding that remains outstanding.
ATO Assistant Commissioner Anita Challen said these outstanding payments from small businesses have significant impacts on the wider economy and community.
“It’s definitely a really significant impact when you consider what that money could otherwise be used for in some pretty tough times from a broader economic perspective,” she said.
“We are very mindful of the impact that the money not being paid appropriately through taxes has on the community, which is why we have been shifting back to our ordinary debt recovery processes.
“Taxes pay for critical services that benefit all Australians and the contribution from every taxpayer matters.”
The ATO said interest on outstanding tax debts accrues daily and the current rate of general interest charge will be 11.36 per cent for the July to September 2024 quarter.
Thomson said the ATO understands the difficult economic environment for all Australians, yet has an important role in ensuring all businesses are meeting their tax and super obligations.
“The ATO is committed to ensuring all businesses that do not comply with their obligations aren’t getting an unfair competitive advantage over other businesses who pay on time and do the right thing by the employees who help keep their businesses running,” Thomson said.
“It also makes good business sense to pay on time and in full to reduce the amount of interest paid.”
