From unpaid super to GST fraud: ATO’s debt collection priorities revealed

The Australian Taxation Office (ATO) is shifting its focus to ensure all tax bills and superannuation are paid in full and on time. Mackay Goodwin recently hosted assistant commissioner Jill Kitto and senior insolvency advisor Gary Busby to talk about the ATO’s current focus on debt collection, what areas are currently the biggest priorities and why.

Perhaps one of the biggest standouts at the seminar was to hear the ATO understands how tough it is for people at the moment, including for businesses of all sizes. They are incredibly cognisant of how things have been playing out, since COVID, the bushfires, and of course the floods. Jill explained the ATO pivoted its debt collection processes away from collection to focus on assistance. And it’s really only just started getting back to normal now.

To put that in perspective, the ATO currently has about $50 billion worth of collectable debt, which is the highest it’s ever been. It’s an 89% increase on pre-COVID figures. 

Return to normal debt collection

During the height of the pandemic, the ATO adopted a soft approach to debt collection, focusing on providing help and assistance. However, the situation is now shifting back to regular debt collection processes. The ATO’s approach involves striking a balance between helping businesses in genuine need and ensuring a level playing field for all businesses.

Compliance expectations

The ATO has high compliance expectations.

Jill told the audience: “We have a really strong tax system because we have such strong compliance with 70% of activity statements lodged on time; 80% of income tax returns are lodged on time and 90% of tax liabilities are paid on time. We don’t want to lose that. We also see that the longer a debt is left unaddressed, the harder it is for those businesses to recover”.

The ATO aims to maintain this high level of compliance as it returns to its regular debt collection procedures.

Key focus areas for ATO

The ATO’s main focus areas for debt collection involve unpaid super, audit-raised liabilities, refund fraud, aged debts, and new self-assessed employer-based debts. These areas are considered high-risk and crucial to maintaining Australia’s strong tax system.

Unpaid Super

Unpaid super is the ATO’s number one focus. This is primarily because unpaid super relates to employees’ entitlements. If businesses are not paying super, it’s often indicative of broader financial problems.

“We have some key focus areas from a debt collection perspective. Unpaid super is probably the number one focus across the ATO at present. It feels obvious to say, but that is because it is employees’ entitlements we’re talking about. Not only does the employee suffer but it tends to raise a few red flags in the sense that if you’re not paying your employees their super, you may be struggling to pay other debts when they fall due as well,” said Jill.

Audit-raised liabilities

The ATO is also focusing on audit-raised liabilities. If a business has been audited by the ATO, and it still has not lodged or paid its taxes, it will raise red flags. The ATO expects these businesses to pay their taxes promptly.

Jill outlined that those businesses shouldn’t “expect the same level of concessions that we would give to those businesses who do get on the front foot and genuinely need support and assistance”.

GST refund fraud

The ATO is not taking GST fraud lightly. Thanks to social media videos explaining how to successfully get a “loan” from the government, GST refund fraud exploded, so it’s heartening to know the ATO is putting greater focus on it this year.

Any incidents of GST fraud are seen as blatant theft and are in the ATO’s sights. Jill explained, “I can assure you, we take tax fraud seriously. It is not a victimless crime — it is blatant theft against the community, and we just won’t tolerate that”.

Aged and high-value debts

The ATO recently received government funding to pursue private, wealthy organisations with debts over $100,000 or debts more than two years old. These businesses, which should have the capacity to pay, are expected to pay their taxes in full and on time.

New self-assessed employer-based debts

The ATO is also focusing on self-assessed employer-based debts. The aim is to encourage businesses to consider taxes as real-time liabilities, rather than considering them as debts that can wait. By 2026 payday super measures will come in, where employers will be required to pay super on the same day that they pay salary and wages, rather than on a quarterly basis, which will also reinforce real-time payments on liabilities.

Most of all Jill couldn’t stress enough how vital it is to reach out and seek help early: “The most important thing is to engage with us as soon as possible, whether that’s businesses directly reaching out to the ATO or through their accountants and advisors. I can’t stress that enough when you see these early warning signs of businesses struggling. It’s important to seek help before debts become insurmountable”.

It’s clear that the ATO is taking a firm yet fair approach to debt collection. The key to managing tax debts effectively lies in early engagement with the ATO, clear communication, and maintaining an up-to-date compliance record. As Australia recovers from the economic impact of the pandemic, it’s crucial that all businesses, big and small, meet their tax obligations to ensure a fair and robust economy for all.

Domenic Calabretta is the CEO, founder and managing partner of Mackay Goodwin.