Australian Taxation Office resumes chasing small business debts as COVID holiday ends

| 13.05,22. 06:56 AM |

Australian Taxation Office resumes chasing small business debts as COVID holiday ends

The Australian Taxation Office has restarted collecting debts accumilated during the pandemic.(AAP: Tom Compagnoni)

Public and media pressure stopped the tax office going harder in pursing debts owed by small businesses struggling through the COVID pandemic, previously secret internal documents have revealed.

It comes ahead of an expected rising wave of companies going under, as the Australian Taxation Office chases debts it has not pursued since early 2020.

The reports, obtained using the Freedom of Information (FOI) process, reveal a softer approach of sending text messages, sending blue rather than "firmer" orange letters and a move away from "stronger action" in "favour (of) help and assistance" for small business.

As the ATO lauded its new approach to small business debt in October 2021, in a report headed "Context", it urged staff to understand why.

"The ATO is aware that the small business market has been one of the most affected groups during COVID-19 and the associated lockdowns. Media and community sentiment have reflected on both the support for and fragility of this market segment and the ATO has been proud of its role supporting small businesses through the stimulus measures," the document said.

Four Australian bank notes are lined up against each other on a white background.
Tens of thousands of warning letters have been issued by the ATO to chase repayments.(Unsplash: Debora Cardenas)

The scale of the problem is massive.

As of August 31, 2021, the tax office had issued 842,845 reminder letters, with around 55 per cent of them going to small business.

At the time of contacting the ATO for this article, it had sent out letters warning about outstanding debts to 29,552 businesses.

A further 52,319 letters warning about the potential for Director Penalty Notices (DPNs) were sent to people in charge of these companies.

"These programs are focused on those who have not responded to our calls and letters – and have significant tax obligations outstanding," an ATO spokesperson said.

In the FOI documents, leaders told staff: "We also note that there is a significant concern in the community that many businesses were completely reliant on the stimulus measures during COVID and as they are removed and reduced these businesses may not be able to overcome the trading disruption of the pandemic and will be unviable."

ATO credit reporting threats work

The tax office isn't waiting around for the money to come in.

A threat to dob companies with tax debts to credit reporting agencies – which could cause that company's clients to stop doing business with them – has worked.

"The purpose of the disclosure is to support other businesses to make informed decisions about who they are doing business with. The outcome we are seeking is behavioural change and engagement rather than actual disclosure," the document reads, outlining the gambit.

"As a result of their engagement, we have made no disclosures and 69 clients have re-engaged with us in managing total debt worth $6.5 million."

Softly, softly

But a softer approach is notable, particularly after ABC reports that exposed brutal treatment of taxpayers in dispute with the ATO.

In the previously secret documents, the tax office outlines its new pandemic-inspired approach.

"Throughout COVID, the ATO paused its firmer and stronger actions, instead looking to re-engage with help and assistance whilst businesses managed the effects of the lockdowns," it reads.

"The number of early intervention (blue) letters has continued to increase from previous years as we continue to engage with Small Businesses throughout the bushfires and COVID-19 offering help and assistance.

"Over this same period, however, the number of letters with a firmer tone (orange letters) has reduced, instead reverting to lighter touch blue letters."

How you know this

The Freedom of Information (FOI) system allows you to request information from government departments and agencies.

Search 'FOI' on the website of the department or agency to find the email address for sending a requests.

Costs can be involved if you continue with a request and there are multiple reasons to knock back requests or redact information.

Of 18 pages released to the ABC in this request, eight are fully blanked out and 10 are partially redacted.

(Votes: 0)

Other News

Woman charged over alleged fatal beating of daughter 30 years ago Emergency flood warnings declared in several south-east Queensland regions as wet weather set to continue Driver arrested after hit and run crash in Adelaide Horse-drawn carriages to be banned from Melbourne's CBD Health warning issued for mosquito-borne viruses in Sydney Man arrested over Newcastle cocaine bust while boarding flight to Singapore Woman dies after car is swept away by floodwaters Bikie boss shot, brother killed in shooting attack at Sydney gym Wet weather caused by La Niña could end by winter, forecasts show Labor leader Anthony Albanese backs minimum wage increase in line with inflation Brisbane flood review labels event 'worst-case scenario', emergency alert system to be upgraded 'Big four' banks made huge profits as Australians took out bigger mortgages for pricier housing Boy fights for life after falling from a height at a Maddington building site in Perth's south-east Albanese pledges $2.2 billion boost for Melbourne's new train network Diver's body found near 50kg of suspected cocaine in Newcastle's Hunter River Travellers hit by lengthy lines at Sydney Airport again Canberra man accused of strangling 11-year-old girl until she was unconscious faces new sexual assault charge WA man sentenced over 'depraved' child sex abuse will spend 10 years in jail Woman charged with two counts of murder after Brunswick stabbing Queensland police offer $500k reward in Deborah Anne Smykalla cold case murder Three years in prison for Tasmania Police officer who killed a man and injured his wife in Launceston crash Three-year-old Nevaeh Austin, found unconscious on childcare centre bus near Rockhampton, no longer in critical condition Darryl Trevor St Clair sentenced to four years in jail over South Plympton hammer attack الآلاف من معلمي نيو ساوث ويلز يضربون من أجل تحسين الأجور وتقليل أعباء العمل Cyclist dies after colliding with a truck in Adelaide's northern suburbs Loose loads causing chaos and destruction on Melbourne freeways Pensioners suffer largest increase in living costs since 2006 Child critical after being left on central Queensland bus Port Augusta teacher Ammy Singleton accused of grooming boy for sex Melissa Caddick's eastern suburbs mansion set for sale