ATO “reset”: The five types of business debt at the top of the tax office’s watchlist

The Australian Taxation Office (ATO) has revealed the five types of business debts at the top of its watch list, as the extraordinary leniency the tax office showed to late payers through COVID-19 lockdowns finally comes to an end.

Speaking before the Tax Institute Tax Summit in Melbourne on Thursday, Vivek Chaudhary, ATO deputy commissioner of lodge and pay, said it was necessary to provide taxpayers, including small businesses, with major support through lockdowns and harsh public health restrictions.

Payment plans, deferred due dates, remitted penalties and interest, and even the ability to lodge without paying were all part of the ATO’s playbook.

“For a lot of businesses this was the right thing to do, and it delivered many successes,” Chaudhary said.

“But it has also had an impact on payment culture, and we are seeing more businesses not paying tax on time since before the pandemic begun.”

The ATO is now returning to pre-pandemic compliance activities, as it is essential to “shift away from the COVID payment culture into a normal payment culture”, he added.

As revealed by ATO commissioner Chris Jordan, the ATO is now chasing some $50.2 billion in collectable debt, of which small businesses account for more than $33 billion.

Chaudhary said the ATO has identified five high-priority payment types “where our reset will be most noticeable”.

Topping the list is the unpaid Superannuation Guarantee Charge (SGC), the penalty imposed on businesses that do not pay the required Superannuation Guarantee when it becomes due.

“The majority of unpaid superannuation guarantee charge – $1.8 billion – is owed by small businesses,” Chaudhary said.

The ATO has prepared tools like garnishee notices, directions to pay, Director Penalty Notices, and even prosecution actions to ensure payment of the SGC.

“We are serious about collecting unpaid super,” he said.

“We will be continuing to detect employers who are taking advantage and not paying the relevant entitlements to their employees.

“These employers will be held to account.”

New self-assessed debts raised by employers are on the list, speaking to Chaudhary’s fears that taxpayers are waiting for the tax office to reach out before actually paying their debts.

Refund fraud maintains a major concern, Chaudhary said, after it was revealed fraudsters have scammed billions of dollars from the tax system by obtaining fake GST refunds.

Major, aging debts – that is, debts of $100,000 or more that are greater than two years old – are on the radar.

So too are debts that are the consequence of audit actions initiated by the ATO.

“Some audit adjustments do relate to genuine errors, but some are because the taxpayer or their agent was careless or reckless or perhaps deliberately avoiding paying the right of amount of tax,” said the deputy commissioner.

“These clients will receive no concessions, with heightened expectations of clients to pay regarding liabilities raised.”

You can read Chaudhary’s full speech here.