As businesses across the country continue to rebuild, and attempt to return to a pre-pandemic state, the ATO has made clear its intentions to target small business tax debt with a view to bringing figures back in line with the pre-pandemic levels.

What does “Targeting Small Business Tax Debt” mean?

The last two years have seen considerable stress for small businesses in so many different aspects of their operations. As one means of reducing the burden during that time, the ATO essentially relaxed its efforts in enforcing some of the requirements when it came to the lodgement and payment of taxation obligations.

Now that things seem to be “getting back on track” for a majority of businesses, the ATO has said that it will now “resume firmer and stronger lodge and pay activities”. Although it was stated that the ATO would be “balancing debt recovery with small business support”.

Indicatively, the current ratio of collectible debt to net tax collections is around 8-8.5 percent and the ATO is aiming to reduce that to less than 6 percent by 2025-26. 

So, if your business currently has a debt with the ATO and you have not recently negotiated a repayment plan, we would strongly recommend taking action to do so sooner rather than later, before the ATO contacts you.

The team of tax accountants at The Quinn Group have considerable experience liaising with the ATO to find workable solutions for settling tax debt. Contact us by calling (02) 9223 9166 or submit an online enquiry now to make an appointment to discuss your ATO tax debt situation.

How will the ATO Target Small Business Tax Debt?

Using “targeted strategies” and “data-driven insights” the ATO will identify businesses that are required to address their outstanding small business tax debts.

One such strategy is ramping up the issuing of DPNs (Director Penalty Notices) to company directors of businesses that ATO is seeking to recover debt from.

You can find out more about DPNs by reading our recent article Director Penalty Notices: Personal Liability for Company Debts

Between April 2022 and August 2022 the ATO is said to have issued upwards of 52,000 warning letters and 7,000 DPNs. That equated to around 120 DPNs being issued each day and the number was set to continue to rise.

Consequently, the ATO’s targeted focus in this area resulted in 674 businesses being wound up or sent into administration in July 2022. These figures are now back in line with the comparable data from 2019-2020 after seeing figures of about half that level for the past two years.

This indicates a swift change of gear from the national taxation body in quite a short time frame after such a challenging economic period. Experts expected that we’d perhaps see a slower return to the ATO’s usual level of debt recovery and insolvency activity and businesses get back on their feet, but it seems that is not to be the case.

Tax Debt Can Affect More than Your ATO Ledger

In light of the ATO’s increased focus on small business debt, it is important to remember that recent changes may result in your business tax debt being made available on your business’ commercial credit report.

If you have a current business tax debt with the ATO (that meets the defined criteria), then this information being made available on your credit reports could have a significant impact when it comes to borrowing and seeking financial support or investment.

Read Your ATO Business Tax Debt could Impact Your Credit Rating to find out more about the changes and relevant criteria.

Have Business Tax Debt? Do Something!

It is not unexpected that many businesses will have accrued some kind of business tax debt, particularly over the last two years. The worst thing that you can do is to stick your head in the sand and hope that it will all just go away. It won’t. The ATO will catch up with you eventually and the emotional and physical costs will likely be so much greater the longer the problem is left to accumulate.

The best thing that you can do is to take a proactive approach. It likely won’t be resolved overnight, but taking small and productive steps in the right direction can help you to get your business tax debt back on track.

The team of tax accountants at The Quinn Group have considerable experience liaising with the ATO to find workable solutions for settling tax debt. Contact us by calling (02) 9223 9166 or submit an online enquiry now to make an appointment to discuss your ATO tax debt situation.