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  • Commissioner's statement on ASBFEO review into enforcement of debt recovery

    Today the Australian Small Business and Family Enterprise Ombudsman released their review of our debt recovery action for small businesses in dispute with us at the Administrative Appeals Tribunal during 2017–18.

    Our primary concern is to ensure that Australian small businesses are not alarmed by this report. Of the 108 small business cases finalised in the AAT in 2017–18 there were only 17 cases identified where some type of debt recovery activity occurred. We took garnishee action in just 4 cases, and pursued debt in other ways (for example a letter or a call) in a further 13 cases.

    We are talking about low numbers here. There are 3.8 million small businesses in Australia, and I want to ensure that that these figures are not extrapolated or manipulated. These are cases that went to the AAT, and as such have unique characteristics, that do not reflect the broader small business population.

    The fact is that collectively, small businesses owe $15 billion in tax debt, which accounts for almost two thirds of all debts owed. This is growing year-on-year and we have a legislative responsibility to collect tax debt. When a customer of a small business pays GST on a purchase, or when an employee of a small business sees income tax withheld from their pay packet, it is our job to ensure that the tax is passed on, as this was never the small business’s money.

    In 2017–18, of the cases that went to the AAT almost $5 million was owed by the four taxpayers who were the subject of a garnishee while before the AAT. This includes one taxpayer who alone owed almost $2.5 million in tax debt. In this case we successfully garnisheed approximately $181,000 from the proceeds of a property sale.

    This approach reflects our long standing policy on debt recovery for cases in dispute at the AAT: we will only pursue disputed debt in exceptional circumstances. For instance, where there are links to organised crime, phoenixing, evasion or other fraudulent activity, or where we have evidence of the taxpayer dissipating assets or transferring funds to frustrate collection of tax. In some cases we may pursue a component of undisputed debt while a separate disputed component is before the AAT.

    The four cases where garnishee action was taken were highly unusual. One of the matters involved a tax agent with a chequered history of fraud and evasion, on top of non-compliance, overdue lodgments and undisputed debt of over $100,000. The tax agent was believed to have gambled away over $300,000, refused to return our calls and letters, and failed to provide evidence. It is clear given these circumstances why garnishee action was appropriate.

    Another one of these cases was referred to the ATO by Australian Customs and Border Protections Services and involved evidence of engagement in criminal activity by the taxpayer. During the appeal process the taxpayer started hiding assets which led us to issue a garnishee.

    We tabled our full submissionExternal Link to the ASBFEO review at Senate Estimates including details of our actions.

    I note there are seven recommendations and we will give consideration to these, in the context of our role in finding the balance between ensuring we support honest businesses exercising their dispute rights, while not rewarding deliberate non-compliance.

    Any small business taxpayer who is struggling to meet their payment obligations can call the ATO to negotiate a payment plan, or set one up online if the debt is less than $100,000. In 2017–18 $4 billion in small business debt was being paid through payment plans.

    Managing tax debts and disputes are complex endeavours, and we are always looking to improve. This is why in 2018 I asked the ANAO to come and review the way we manage tax debts for small businesses. I look forward to the ANAO’s report, and to our continued work in this space.

    Chris Jordan

    Commissioner of Taxation

    Last modified: 29 Apr 2019QC 58684