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  • How we manage debt

    The ATO recognises taxpayers may occasionally experience short term cash flow issues that prevent payment on time.

    Our goal is to:

    • help taxpayers meet their payment obligations on time; or
    • address any debts that arise as early as possible, while they are manageable.
    1. For the minority of taxpayers who do not promptly address their tax debt, we continue to improve and refine our collection strategies.
    • The ATO’s approach to debt management has been subject to external scrutiny in recent years, by both the Inspector-General of Taxation and the Australian National Audit Office.
    • Neither of these reviews found systemic issues and we have continued to evolve and refine our approach in line with the recommendations of these reviews.
    1. We provide targeted support to taxpayers experiencing serious hardship by using a range of debt relief options, including payment plans tailored to individual circumstances.

    In 2016–17 we negotiated 950,000 payment plans, of which 650,000 were for small businesses. In recent years we have:

    • increased the amount for payment plans that can be entered via our automated phone service from $25,000 to $100,000
    • enabled sole traders to set up plans for debts up to $100,000 via ATO online for both income tax and activity statement debts.
    1. The ATO only takes firmer action (such as garnishee) where taxpayers consistently do not engage in dealing with their tax debt.
    • In 2016–17 we issued approximately 24,000 garnishees (14,000 for small business) - indicating we use garnishee powers in about 0.5% of collectable debt cases.
    • Firmer action is important to bring taxpayers to account and make sure we are creating a level playing field for other small businesses who do the right thing, lodge returns and pay tax.
    1. For the vast majority of taxpayers who have a dispute, no recovery action is undertaken. 

    We have 4,300 active disputes currently on hand (a tiny 0.0003% of all taxpayers) and less than 5% of these have recovery action underway.

    1. An independent external review of our insolvency cases in 2017 concluded our collection practices do not prematurely lead to viable taxpayers being made insolvent.

    Of all bankruptcies in Australia in 2016–17,

    • the ATO initiated 3.9%
    • the ATO initiated bankruptcy or wind up in 0.04% of debt cases.

    As at 31 December 2017, the ATO:

    • has approximately 1.7 million accounts in collectable debt;
    • was owed $21.4 billion in collectable debt, with $13.9 billion (65%) related to small businesses.
    Last modified: 09 Apr 2018QC 55057