• Collecting debt

    In 2010-11 the environment continued to be challenging for debt collection as the community experienced the ongoing effects of the economic downturn and a series of natural disasters.

    We achieved a 4.2% reduction in the value of collectable debt on hand and reduced the ratio of collectable debt on hand to total collections to 5.2% at 30 June 2011. We achieved a slight reduction in the number of collectable debt cases on hand at 30 June 2011 to 1,469,183, down from 1,487,264 in 2009-10.

    TABLE 4.4: Collectable debt compared to total collections, 2009-10 to 2010-11

     

    2009-10

    2010-11

    Change

    Collectable debt on hand at 30 June (a)

    $14.7b

    $14.1b

    -4%

    Total collections (b)

    $253.2b

    $273.0b

    +8%

    Collectable debt on hand/total collections

    5.8%

    5.2%

    -11%

    (a) Adjusted to reflect correct classification and account posting corrections.

    (b) Refer to Table 4.1 for full details.

    We reduced aged activity statement debt from 18.8% of total activity statement collectable debt at 30 June 2010 to 16.8% at 30 June 2011.

    The total debt holdings for 2010-11 were $27.5 billion, a 0.1% decrease on 2009-10.

    TABLE 4.5: Debt holdings, 2009-10 and 2010-11 (a) (b)

    Debt holdings

    2009-10
    $b

    2010-11
    $b

    Change
    %

    Collectable debt (c)

    14.7

    14.1

    -4.2

    Activity statement debt

    8.7

    8.2

    -5.9

    Income tax debt

    5.6

    5.5

    -2.5

    Superannuation guarantee charge debt

    0.3

    0.3

    +3.4

    Debt subject to objection or appeal

    8.9

    8.1

    -9.1

    Insolvency debt

    3.9

    5.3

    +35.8

    TOTAL

    27.5

    27.5

    -0.1

    (a) Percentage changes are calculated on unrounded figures.

    (b) Rounding may cause totals to differ from the sum of components.

    (c) Collectable debt is debt that is not subject to objection or appeal or to some form of insolvency administration. The breakdown of collectable debt lists only the major components.

    Our debt collection performance improved in 2010-11 with 2.1 million debt cases being finalised, an increase of 19% over 2009-10.

    TABLE 4.6: Debt collection effectiveness indicators, 2009-10 and 2010-11

     

    2009-10

    2010-11

    Debt inventory turnover ratio (a)

    1.5

    1.8

    New debt resolved in the year established (b)

    54.5%

    64%

    Intake of debt/ total collections (c)

    8.7%

    9.1%

    (a) Measured as the value of debt resolved over the average of opening and closing inventory. Higher turnover rates are desirable.

    (b) New debt includes debt added to existing debts within the financial year.

    (c) Intake of debt is activity statement and income tax debts only. These account for over 90% of total debt.

    We continued to refer low value debt cases to a panel of external collection agencies. Before referring a case to an agency we give a taxpayer an opportunity to take steps to address their tax debt. We referred 414,212 cases to our external collection agencies, resulting in collections of $623 million.

    In 2010-11 we wrote off $3.8 billion compared with $1.7 billion in 2009-10. This increase partly results from picking up write-offs that could not be undertaken in 2009-10 and the ongoing impacts of the global financial crisis. Debts written off are either 'irrecoverable at law' (bankruptcy or wind-up) or 'uneconomical to pursue' (where cost of recovery exceeds likely collections as the taxpayer has no assets or funds and there is little chance of their situation improving).

    Key performance indicator

    Optimise debt collection for the current environment

    2008-09

    2009-10

    2010-11

    4.6%

    5.8%

    5.2%

    The ratio of collectable debt to total cash collections

      Last modified: 31 Oct 2011QC 28036