After having paused its tax debt collection activities for the benefit and recovery of businesses that were affected by the COVID-19 pandemic, the ATO has recently resumed its activities in recovering unpaid debts and obligations.
The ATO is currently pursuing these debts and obligations at breakneck speed as findings indicate that the tax debts have now reached more than $34 billion.
As Australia’s largest creditor, ATO’s debt booked has jumped by 77.6 per cent in just four years, with small businesses sharing the largest burden of this debt, comprising 62.6 per cent of the total book value.
Already, the agency has sent over 50,000 Director Penalty notices as initial moves. Insiders are closely monitoring as well what the next moves of the ATO will be.
Ulrika Lobo, Director of Sparrow Loans, believes that corporate insolvencies and voluntary administrations will rise and has warned directors about ignoring communication from the ATO.
“What many directors may not realise is that any unpaid ATO debts, PAYG and superannuation accrued and owed by the business become the personal responsibility of the director if the business cannot pay them,” Lobo said. “Lenders may be able to see your outstanding tax debt on your credit file too, which can affect your current loans or your applications for new loans, especially if they are over $100,000”, she added.
Adam Preiner, director of Integra Restructuring and Insolvency, commented on the significance of outstanding tax debt, saying, “Company tax debts over $100,000 will be reported on your credit file. Once the ATO starts ramping up its collections, directors should communicate and negotiate with the ATO to avoid or minimise penalties. Don’t ignore any penalty notices.”
Reports note that the ATO debt has been growing since 2019, further aggravated by suspended debt collection during the COVID-19 pandemic. Debt growth outpaced both inflation and the GDP, which has been a source of worry among some observers.
