Months after the tax office hit pause on a letter campaign that involved telling small businesses owners that it may seek to recover ‘on hold’ historical tax debts, the federal government has said it will seek to change the law that prompted the debacle.
In November 2023, small business owners and tax agents were surprised by the letters about the debts, which were in some cases for as little as 31 cents.
While the Australian Taxation Office (ATO) had previously not pursued the debts, including during its pandemic-era leniency, it is required by law to recoup monies owed to it, including by using a refund from a taxpayer’s tax return to offset the amount owed.
At the time, an ATO spokesperson told SmartCompany the tax office expected more than 69,000 clients to have their 2023-2024 tax refund offset by a debt on hold, and the estimated value of those debts was $274 million.
The recovery activity was likened by some to the fraught robo-debt scheme, and resulted in the ATO pausing the letters in November 2023.
However, the government now plans to amend the tax law to give the Commissioner of Taxation discretion to not use a taxpayer’s refund to offset old tax debts, in cases where those tax debts were put on hold prior to January 1, 2017.
According to the budget papers, this discretion will apply to small businesses, as well as individuals and not-for-profits.
To see SmartCompany‘s full budget coverage, click here.
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Editor
Eloise is an experienced business journalist and editor, who has held senior editorial roles at SmartCompany since 2014. Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on LinkedIn, and Twitter at @ellykeating.
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