For some time now I have been talking about the importance of reducing tax and superannuation guarantee charge debt in order to promote a level playing field.
When businesses use their tax and superannuation guarantee charge debts as a line of credit it gives them an unfair competitive advantage over the majority of people who pay their tax on time. This is why a statutory interest rate applies to overdue debts, and why there is also a range of sanctions available when this occurs.
Having said that, we are all human and we all make honest mistakes, and it's easy enough at times to fall behind with our bills, often because of things beyond our control, such as illness, the loss of a job, or a downturn in business. When we get into this predicament it is stressful for us.
In these situations, we expect to be treated fairly, taking into account our circumstances. This is particularly the case where we have a track record of good compliance including timely payment of obligations.
The purpose of this message from me is to assure you that the Tax Office will be fair and reasonable with you. When you experience difficulty meeting your tax obligations, contact us early so that we can discuss your situation, and help stop the problem getting worse.
In fact, if your tax debt is less than $25,000, you can enter into an arrangement to pay by instalments by phoning our self help services:
- Individuals - 13 28 65, or
- Businesses - 13 72 26.
If you are a tax agent and would like to contact us on behalf of a client who cannot pay their tax on time or has an outstanding tax debt, please call 13 72 86 (Fast Key Code 1 2 2) to discuss their circumstances.
We are also being proactive in helping people avoid escalating tax and superannuation guarantee charge debts. By contacting people early we can work with them to ensure their debt doesn't grow and become unmanageable.
We will also take firm action with those who consistently choose not to work with us.
Unfortunately, there continue to be people and businesses who don't work with us to clear their tax and superannuation guarantee charge debts.
At the end of March 2007, collectable debt totalled $10.1 billion. While internationally our percentage of collectable tax debt to total tax collections is relatively low, the amount outstanding is still significant.
Last year, I announced some new initiatives we would be trialling to contact people with a debt and encourage them to work with us to meet their obligations.
We trialled three new approaches - dialler technology, calling people after business hours and referring low-level debts to an external collection agency.
These initiatives have had some very positive results, helping to reduce the growth of collectable tax debt to just over 6 per cent in 2005-06, down from 27 per cent the previous year.
We have collected $37 million from the after-hours trial (which only applied to a small sample of taxpayers who had not responded to previous attempts to contact them) and $21 million from the external collection agency trial (which only applied to a small sample of low-level debts).
By far, the most successful of these trials was the use of dialler technology.
We used this technology to automatically work through a list of phone numbers, filtering out busy signals and unanswered numbers, allowing us to engage with a greater number of taxpayers more efficiently.
Between May 2006 and March this year, we made 193,000 taxpayer contacts, negotiating 45,000 promises to pay, totalling $1 billion.
In undertaking these trials, we made every effort to ensure that our activities were respectful and professional. I'm pleased with the fact that we received very few complaints from people who were contacted through these initiatives.
In this year's federal budget we received extra funding of $125.7 million over four years to work on reducing aged debt and collecting superannuation guarantee charge debt owed by employers.
Given the positive results of the recent initiatives and this extra funding, we will be expanding our debt collection capability to incorporate the use of dialler technology and debt referral into our business-as-usual approach.
Around $42 million over four years will be spent to fund external collection agencies to collect a selection of tax debts on our behalf.
The agencies will adhere to strict guidelines in relation to privacy and professionalism and will report back to us monthly on their progress and adherence to high quality standards.
Any uncollected debt will remain the responsibility of the Tax Office and will not be 'on sold' to the agencies.
I will make public the new panel of debt collection agencies after the selection process has been finalised - toward the end of this financial year.
We will also spend $16 million over four years to expand our dialler technology work through infrastructure development and additional licences that will increase our calling capacity.
A further $40 million will be spent over four years to recover aged tax debt. Debts over two years old can often be difficult and costly to recover and we will be looking to implement innovative strategies to reach these taxpayers and encourage them to work with us.
Where appropriate, we will try to help people clear their debts - get them over the line so to speak - using reasonable payment arrangements, and/or remission of some or all of their outstanding interest.
In some cases, the solution may be to write off the debt as not recoverable, or in cases of serious hardship, provide release from some or all of the debt.
In cases where the tax or superannuation systems are being abused, we will take firmer action.
The level of superannuation guarantee charge debt owed by employers that have failed to make these payments on behalf of their employees is an area we'll be concentrating on.
It's vital to ensure that employees are not missing out on their superannuation savings, so we will be increasing the number of dedicated staff in this area to help recover these debts.
The simple fact is that employers who do not properly pay their superannuation guarantee obligations are using their employees' money. It gives them an unfair competitive advantage over other businesses and it is unfair to their employees who run the risk of losing their retirement income.
We'll also be using dialler technology and debt referral to ensure, where possible, that this money is returned to employees. We have found that the earlier our interventions in this area, the better the outcome for the employees.
I'm very proud of the work we have done to date and will continue to keep you updated on the progress of these strategies.
I encourage anyone who is concerned about their outstanding tax debt or superannuation guarantee charge debt to call us on 13 11 42 as soon as possible. It's important we understand your situation and begin working on a solution with you.
Michael D'Ascenzo
COMMISSIONER OF TAXATION
Last Modified: Sunday, 27 May 2007