Resumption of Tax Compliance Activities by the ATO

The Australian Taxation Office (ATO) has announced that from March 2021 it will, on a case-by-case basis, resume debt recovery activities and lodgement compliance activities.

This is no surprise: Tax debt has now reached $53 billion

The ATO delayed debt recovery against errant taxpayers for almost a year during the covid-19 pandemic in 2020.

It also took a ‘soft’ approach to lodgement compliance, refraining from prosecuting taxpayers that failed to lodge or otherwise remained non-compliant with statutory reporting obligations.

There is no denying that the ATO can be aggressive when pursuing tax debts

It can also be very reasonable when met with taxpayers who are genuinely struggling and require assistance with extensions of time to pay tax debts.

The ATO understands that the 2019 bushfires, covid-19, and recent floods in NSW may continue to have a significant impact on taxpayers and tax professionals.

In these cases, the ATO will generally not take compliance action where it is aware that the taxpayers are not deliberately misleading or defrauding the ATO.

Please note that tax debts owing to the ATO take priority over all other existing unsecured debts.

The ATO also has power to issue a Garnishee Order against your personal bank account to ensure that your tax debt is paid.

In the worst-case scenario, the ATO can bankrupt individuals and wind-up companies.

All communications from the ATO ought to be given attention

Letters demanding lodgement or payment should not be ignored.

Prompt attention can assist to keep a lid on tax penalties and interest.

Do be proactive and consult a tax professional.

It may be that options such as applying to the Commissioner of Taxation to remit penalties and interest and negotiating a payment arrangement may be open to you.

Any application for the remission of penalties and interest or statements made in payment arrangement negotiations must be carefully considered and crafted.