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The ATO is Cracking Down on Small Businesses with Tax Debts

The ATO are tightening their approach on tax and superannuation debt collection, signalling a shift from pandemic-era leniency to stricter enforcement.

So what's it all about?

Deputy Commissioner Vivek Chaudhary announced last week that the ATO would be reducing the instances of granting remissions on interest charges and penalties and will be taking "firmer actions" from here on in to collect debts. This crackdown comes in response to an alarming 89% increase in collectable tax debt over the past four years, reaching $50.2 billion.

Small businesses account for a significant portion of this debt, owing $33 billion of the $45 billion total business debt. Chaudhary noted that businesses have been neglecting tax and super payments, treating them less urgently than other operational costs.

To counter this trend, the ATO will allocate $82 million in budget funding to specifically target businesses with debts exceeding $100,000 or those older than two years. Concessions for such clients will be eliminated, and payment plans will be both limited and time-bound.

In addition to tax debts, the ATO will show little tolerance for unpaid superannuation. A suite of enforcement actions, ranging from garnishees and director penalty notices to potential bankruptcy, will be employed to ensure compliance. Chaudhary stressed the need to re-establish the culture of paying taxes on time for the benefit of the Australian community and revealed that the ATO had already increased its legal recovery actions, issuing thousands of penalty notices and initiating wind-ups. FYI, 100 wind-up notices were filed in July!

The era of using the ATO as a low-interest loan facility is over. Businesses are advised to prioritise their tax and super obligations to avoid harsh penalties and legal actions.

If you are concerned about your tax obligations, please contact us.

We offer advisory and business planning services to help you navigate your business finances. We can help you to create budgets, cashflows, KPI and benchmark reporting and more. With ATO penalties on the rise, and interest increasing to 11.15% for the October-December 2023 quarter (the highest level since the GFC!) it is vital that your business stays on top of its tax obligations.

Contact us for a business health check today

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