Feature: GST debt non-pursuit
Non-pursuit helps ensure that we are focusing our debt collection activities on the right cases by removing those cases where we are either prevented by law from pursuing recovery (irrecoverable at law) or where recovery is unviable (uneconomical to pursue).
Irrecoverable debts are mainly limited to circumstances associated with insolvency and we have little control over these amounts. However, we have the discretion to decide that a debt is uneconomical to pursue if:
- it is probable that the total cost of recovery action will exceed the return to the Commonwealth, or
- the taxpayer has no assets or funds and there is little chance of their financial circumstances improving.
Debts that are considered to be uneconomical to pursue may be re-raised if it is apparent that the taxpayer’s circumstances have changed and recovery action becomes economical, or to absorb a subsequent credit.
Putting non-pursuit in perspective
Over the past five years, the ratio of GST uneconomical to pursue to GST revenue has not exceeded 1%. In 2014-15, the ratio of GST non-pursuit to GST revenue was 2.6%, with 1.7% irrecoverable at law and 0.9% uneconomical to pursue. Over the past five years, the ratio of GST non-pursuit to GST revenue increased by 0.7 percentage points (pp), on the back of a 0.8 pp increase in irrecoverable at law, which was partially offset by a 0.1 pp decrease in uneconomical to pursue.
Our approach to non-pursuit
Where we identify that a taxpayer is insolvent, we take timely action to initiate bankruptcy or wind-up. In the past, we have sporadically written off insolvent debts as irrecoverable at law as resourcing allowed. We are now increasing our focus on writing off these debts in a timelier manner.
Increased non-pursuit in 2014–15
In 2014-15, $1.4 billion was not pursued, which represents an increase of 51.8% year-on-year.
The key reasons for this increase were:
- cleansing irrecoverable cases in the following categories:
- insolvent deregistered companies
- insolvent legacy debts
- debts previously determined to be irrecoverable at law then re-raised to absorb a credit
- individuals bankrupt for more than 3.5 years
- deciding not to pursue cases in the following categories:
- debts comprising interest and penalties where the primary tax has been paid and ongoing obligations are being met
- businesses that have ceased trading and there are limited or no options to successfully recover the debt.
Figure 11: GST uneconomical and irrecoverable
Figure 12: Ratio of GST non-pursuit to GST net collections