The Government today released the Inspector-General of Taxation's report of his Review into the Tax Office's Small Business Debt Collection Practices.
The report looked at issues of fairness and balance in the Australian Taxation Office's small business debt collection practices and policies. The report was prepared after consideration of submissions from interested groups and stakeholders.
The Inspector-General found that, contrary to media reports, there is no evidence of the ATO systematically being unnecessarily harsh with, or too quick to take legal action against, small business tax debtors. Moreover, the Inspector-General noted there is a broadly held view that the ATO is lenient in its approach to collecting debt from the small business sector and it gives viable small business debtors adequate opportunity to continue to trade out of their tax debts.
In response to issues raised, the Inspector-General recommended that, to address issues of competitive disadvantage, the ATO should:
- differentiate the collection approaches it takes against those small business tax debtors that want to comply with their payment obligations but need short-term assistance to do so, from the action taken against firms that are either incapable of meeting tax payment obligations within a relatively short timeframe or are in serial default.
- work with the small business sector and their representatives to develop new administrative approaches that will, where necessary, actively assist small businesses manage their cash flows better, in order to meet tax liabilities as and when they fall due.
The Commissioner of Taxation agreed with the recommendations, indicating they reflect the ATO's current directions.
The ATO is already implementing initiatives that meet the recommendations. They include a 'small business debt initiative'. The initiative offers protection from legal recovery action to about 300,000 eligible small business cases with debts under $25,000 on the condition that they enter an arrangement to repay their tax debt by direct debit within specified time frames. The Inspector-General supports the concept of the initiative as a positive encouragement to small businesses to finalise outstanding debts.
The report, which also contains the ATO response, is available at www.igt.gov.au.