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  • 6. Debt and lodgment

    Debt

    At 30 June 2020, GST total debt was $10.2 billion, up 79.7% compared to last year. Estimated GST collectable debt was $7.9 billion, up 84.3% compared to last year.

    A couple of factors have contributed to the significant growth in GST debt:

    • the ongoing impacts of droughts and bushfires
    • the unfolding COVID-19 impact and the ATO pausing most debt recovery activities.

    As part of the Government and the ATO’s response to COVID-19, PAYGW was fully or partially offset by the Cash Flow Boost and PAYGI obligations were able to be varied downwards. As these amounts are payable via activity statements (AS), this treatment limited the extent to which PAYGI and PAYGW would otherwise have driven a greater increase in total AS debt. As a result, the rate of growth in GST debt was also higher than the overall rate of growth in total activity statement debt.

    We aim to improve clients’ understanding of their obligations and, where possible, help them meet their obligations on time.

    In 2019–20, we:

    • enhanced our payment plan services
    • implemented Activity Statement Financial Processing
    • implemented Payment Receivables Management, a suite of predictive and machine learning models that make better use of ATO data science and analytic modelling capability to initiate and shape ATO debt collection activities
    • raised staff awareness of the interconnectedness of clients’ interactions with the ATO as an end-to-end process (through our ‘Better as Usual’ program).

    These initiatives have:

    • improved our understanding of client behaviour, and
    • enabled us to provide the most appropriate support according to their circumstances.

    Through our ‘payment thinking’ initiative we are building trust and confidence in our management of payment and debt. Payment thinking is about designing processes, systems and approaches that make payment an easy and natural part of activities across all stages of tax and superannuation.

    We continue to share best practice with other revenue agencies through a range of channels, including the OECD forum on tax administration and the International Debt Management Committee.

    Small businesses continue to account for the majority of collectable debt and are a key focus of our payment and debt strategies. Small businesses may experience cash flow issues for various reasons at any time, and they have been particularly impacted over the last year.

    Assisting clients impacted by disasters such as floods, bushfires and COVID-19 was a critical focus for us in the latter part of 2019–20. In response we:

    • paused most firmer action work and all outbound campaigns
    • re-prioritised resources to support client-initiated requests, with a focus on answering inbound calls
    • used stronger action in only the most serious cases of fraud and evasion
    • suspended use of external collection agencies for debt collection action.

    We also offered a range of relief measures, including:

    • providing clients with extra time to pay their debt or lodge their BAS
    • payment plans tailored to clients’ circumstances, including an interest-free period
    • remitting penalties or interest charged during the time clients have been affected
    • releasing clients from their tax debt in cases of serious hardship
    • providing businesses impacted by COVID-19 with the option of temporarily changing their reporting cycle to get quicker access to GST refunds (if they were entitled).

    Table 3: GST debt core indicators

     

    2015–16

    2016–17

    2017–18

    2018–19

    2019–20

    Total GST debt outstanding ($b)

    5.0

    5.6

    5.5

    5.7

    10.2

    Collectable GST debt ($b)

    3.4

    3.8

    4.0

    4.3

    7.9

    GST debt collection rate (%)

    5.9

    6.4

    6.3

    6.6

    13.1

    Note: Collectable debt is debt for which there is no impediment to collection – it is not subject to objection or appeal, or to some form of insolvency administration.
    The debt collection rate is calculated using the estimated GST collectable debt amount as a percentage of 12 months GST revenue collections.

     

    Since January 2020, the impact of natural disasters across Australia and the COVID-19 pandemic have seen GST collectable debt continue to grow whilst GST collections have declined.

    Figure 9: GST collectable debt

    July 2019 $3.6 billion. August 2019 $4.8 billion. September 2019 $4.3 billion. October 2019 $3.5 billion. November 2019 $4.8 billion. December 2019 $5.0 billion. January 2020 $5.5 billion, February 2020 $9.0 billion (COVID-19). March 2020 $7.2 billion. April 2020 $6.8 billion. May 2020 $8.7 billion. June 2020 $7.9 billio

    GST collectable debt has followed a similar trajectory as total collectable debt.

    Figure 10: Ageing of GST debt – account numbers

    2015–16: 0-29 days $45,808 million, 30-59 days $75,147 million, 60-89 days $10,140 million, 90-365 days $95,177 million, over 365 days $81,192 million. 2016–17: 0-29 days $30,821 million, 30-59 days $72,899 million, 60-89 days $9,604 million, 90-365 days $93,557 million, over 365 days $68,195 million. 2017–18: 0-29 days $33,926 million, 30-59 days $86,451 million, 60-89 days $9,901 million, 90-365 days $112,678 million, over 365 days $69,329 million. 2018–19: 0-29 days $37,903 million, 30-59 days $86,655 million, 60-89 days $10,125 million, 90-365 days $122,678 million, over 365 days $86,073 million. 2019–20: 0-29 days $50,382 million, 30-59 days $85,347 million, 60-89 days $23,540 million, 90-365 days $135,218 million, over 365 days $99,495 million.

    Figure 11: Ageing of GST debt – value

    2015–16: 0-29 days 428.20, 30-59 days 462.40, 60-89 days 120.60, 90-365 days 1,103.40, over 365 days 1,267.80. 2016–17: 0-29 days 409.10, 30-59 days 553.00, 60-89 days 163.10, 90-365 days 1,251.60, over 365 days 1,461.30. 2017–18: 0-29 days 441.10, 30-59 days 558.88, 60-89 days 109.06, 90-365 days 1,406.17, over 365 days 1,484.51. 2018–19: 0-29 days 426.31, 30-59 days 564.31, 60-89 days 129.13, 90-365 days 1,510.78, over 365 days 1,638.98. 2019–20: 0-29 days 1,006.28, 30-59 days 1,704.63, 60-89 days 470.16, 90-365 days 2,700.70, over 365 days 1,987.21.

    Lodgment

    In 2019–20, we saw a decline in lodgment performance of 1.6 percentage points (83.4% to 81.8%) for monthly BAS, and 2.1 percentage points (73.1% to 71.0%) for quarterly BAS. A cause for the decline in lodgment performance of BAS is the impact of bushfires and the effects of COVID-19, particularly for small business. By volume of BAS, small business is the largest segment, so a change in on-time lodgment behaviour for small business has a significant impact to the on-time lodgment performance across the overall population.

    Lodgments performance

    • Monthly – The on-time lodgment performance for 2019–20 is 1.6 percentage points below the 2018–19 result. There have been around 46,000 more on-time lodgments received in 2019–20 compared to 2018–19 results.
    • Quarterly – The on-time lodgment performance for 2019–20 is 2.1 percentage points below the 2018–19 result, with around 107,000 more on-time lodgments being received in 2019–20 compared to 2018–19 results.

    As at 30 June 2020:

    • 7.3 million 2019–20 BAS had been lodged, an increase of 113,000 BAS compared to the same time last year
    • there were still a further 2.73 million 2019–20 BAS that were not yet due or had been deferred but are expected to be lodged in 2020–21.

    We have increased direct contact with non-lodgers through the GST compliance program. We seek to influence on-time lodgment behaviour by engaging with clients to address the drivers that have contributed to late or non-lodgment.

    Re-engagement strategy

    In June 2020, we commenced our strategy to re-engage with clients who have an outstanding payment or lodgment obligation.

    Our approach is designed to prevent clients from losing touch with the tax system, given the disruption to business and the significant number of deferred due dates and payment plans. Targeted, tailored, differentiated approaches form part of the overarching strategy. We contact clients as close to the event as possible, to discuss their financial health and wellbeing.

    We support vulnerable taxpayers to get back on track in a way that is sustainable for their circumstances. This includes engaging with taxpayers such as:

    • small businesses that continued operating but with significant financial setbacks
    • those who are looking to restart their operations after a period of temporary closure, or
    • those who have refocused their efforts on a new opportunity.
      Last modified: 30 Aug 2021QC 64820