Small business ombudsman welcomes budget proposal for SMEs to pause debt recovery action in the AAT

Australian Small Business and Family Enterprise Ombudsman Bruce Billson has called the government’s move to allow small businesses to apply to halt tax office debt recovery in the Administrative Appeals Tribunal “a positive step”.

Ahead of Tuesday’s budget, the Morrison government announced it will allow businesses engaged in debt disputes in the Administrative Appeals Tribunal (AAT) to apply to pause or modify Australian Taxation Office (ATO) debt recovery actions linked to the dispute in the AAT.

“[It’s] a really positive step about the tax office recognising that small businesses deserve a fairer go when it comes to disputes they may have with the ATO,” Billson tells SmartCompany.

The AAT is the tribunal that hears disputes between businesses and the ATO, as it has jurisdiction to review decisions made by the Commissioner of Taxation.

However, currently small businesses are only able to pause or modify ATO debt recovery actions through the court system, which is an expensive and lengthy process.

Billson says the opportunity for recovery action to pause while disputes are addressed by the AAT gives businesses a “chance to focus on continuing to invest time and money in running their business, whilst they also address tax matters before the AAT”.

“We’ve had cases shared with us where while a dispute is ongoing recovery action was being pursued with some vigour by the ATO, really cutting across and pre-empting the outcome of the tribunal judgement,” he says.

The changes will allow small businesses to have their tax disputes concluded in the AAT without being pursued by the ATO over those debts at the same time.

“It can be very debilitating for the small business owner because it takes resources away from the business … and it also sees the business concerned about the business viability because of those resources being drained out of it whilst they make their case to the tribunal,” Billson says.

Small businesses, including sole traders, with an aggregated turnover of less than $10 million per year will be eligible to use this streamlined approach.

The change, which will only come into effect once legislation grants new powers for the AAT, will bring Australia more in line with the tax systems of the UK and US.

Billson says the proposed changes are one of three positive developments made to the tax system.

Recently, the ATO decided to make its small business independent review service permanent.

The small business independent review service was adopted to allow businesses to request an independent review of their tax liabilities if they believed the ATO incorrectly calculated them.

“That’s a program we supported after getting some really positive feedback from small businesses that used that independent internal review services,” Billson says.

ASBFEO also established a tax concierge service, with leadership from ATO deputy commissioner small business Deborah Jenkins, that helps businesses decide whether to take legal action over a tax debt.

“Collectively, these changes align with ASBFEO’s vision of a tax system that works for the small business sector,” Billson says.