Insolvencies on the rise at ATO increases recovery
Stronger debt recovery action by the tax office is increasing financial stress and pushing more businesses under. The rate of insolvencies is now around the peaks experienced just after the global financial crisis in 2008. There are calls for the ATO to use more discretion to allow taxpayers more time to pay down old debts and waive them outright in cases of domestic violence.
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TVTranscript
00:00What you saw during the pandemic was the ATO taking a leaner approach to chasing down tax
00:09and super debts. But debts have accumulated to $34 billion. That's just owed by small
00:16business. In total, more than $50 billion of debt owed to the ATO. And so the ATO is
00:21now ramping up its debt recovery action. It has a lot of tools at its disposal to be able
00:28to go after tax debts. So one of those tools is that it can issue what's known as a garnishee
00:34notice. Now, this is an extraordinary power. It does allow the ATO to directly take money
00:40out of your bank account or from direct from your employer. And we've seen the use of that
00:46power increase. But what they're really using is something called a director penalty notice.
00:52So this can be issued to former company directors as well as current company directors. We've
00:58seen tens of thousands of these notices issued over the past year. And it's quite stringent
01:04because it only gives that director 21 days to pay up that alleged tax or super debt.
01:10And these debts can be hundreds of thousands of dollars. So you can imagine as a director,
01:15you're getting this notice. It's the first you've ever heard of it in some cases. And
01:19it's saying 21 days pay us, you know, sometimes half a million dollars. And this is causing
01:25a lot of businesses to tip over or to have to restructure or have to face insolvency.
01:33And so we're seeing insolvency levels now reach levels that we saw just after the GFC.