Late 2023, thousands of Australians were notified about an outstanding historical tax debt that they never knew about.
In circumstances when a taxpayer is in serious hardship and unable to pay the ATO, the ATO can temporarily decide to not pursue a debt and place it “on hold”. However, it is not extinguished and can be re-raised on the taxpayer’s account in the future. These debts can also be offset against refunds that a taxpayer may be entitled to.
In 2023, the Australian National Audit Office advised the ATO that excluding debt from being offset was inconsistent with the law, with ATO’s collectable debt increased by 89% over four years to 30 June 2023.
ATO responded to this by contacting taxpayers and agents advising that their debts ranging from a few cents to thousands were “on hold” and “inactive” which could be offset against future refunds.
ATO’s recent statement mentioned, “The ATO has paused all action in relation to debts placed on hold prior to 2017 whilst we review and develop a pragmatic and sensible way forward that takes into account concerns raised by the community.”
Aussie SMEs suffer as tax debt hikes
Two-thirds of the $50b in collectible debt owing to the ATO is owed by small businesses. For entities with debt above $100,000 and has not entered into debt repayment terms, credit reporting agencies will take over from ATO for debt collection purposes.
It is crucial for your business to contact and engage with the ATO if historical debt is owed.
