Commissioner of Taxation Annual Report 2021-22

Posted 10 Nov '22

Small businesses contribute to balloon in tax debt

The Commissioner of Taxation annual report 2021-22 was released last month and it’s been revealed that Australia’s non-disputed tax debt has ballooned out to almost $45 billion over three years, with two-thirds owed by small businesses.

The report, released last month shows small business was responsible for the lion’s share of collectable debt at $29.3 billion on 30 June 2022 and it remains “a key focus of our payment strategies”, the ATO said.

In total, Australia has had an increase in debt of $44.8 billion –  up 16 per cent over 2020-21 and a up 69 per cent since 30 June 2019,  nine months prior to the first pandemic measures.

The ATO admitted the performance of its collection regime had deteriorated over the prior year, with collectable debt now 8.5 per cent of net tax collections against a target of 8 per cent for the year and 6 per cent by 2025–26, according to its latest corporate plan.

“This is an increase of 0.2 percentage points from the end of June 2021 result of 8.3 per cent, and reflects the ongoing cash flow impacts of the challenging economic environment,” the annual report said.

“The increased debt is a result of disrupted economic activity due to lockdowns and cash flow impacts on small businesses and households. During the early stages of COVID-19 we deliberately shifted our focus away from firmer debt collection action, to assist businesses and the community experiencing challenges because of the pandemic.

“Due to these increased debts, we have expanded our engagement through a series of awareness campaigns, advising clients of the potential firmer and stronger actions they could be subject to if they do not engage with us – including director penalty notices (DPNs), garnishee, disclosure of business tax debts or legal remedies including insolvency.”

The ATO said DPNs relating to more than 2,800 companies had been issued since 1 May, with $2.21 billion recovered.

The DPNs followed warning letters in March targeting 30,000 businesses and 52,000 directors owing $10.4 billion.

The report puts “targeted strategies to address collectable debt” at the top of its Looking Forward focus list and the ATO’s corporate plan specified the goal of returning small-business debt to pre-pandemic levels as a target for 2022–23.

Visit the ATO website to access the full report.

What does this mean for you?

It is now more critical than ever to get on top of your ATO debt. If there are significant amounts owing from your business, you may be personally liable should one of these Director Penalty Notices be issued to you.

Please contact us if you need assistance with engaging the ATO in a payment plan.


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