Do you need to act on any of these ATO-related matters?
One: does your business have a tax debt likely to be referred to Credit Watch? Two: the Australian Taxation Office (ATO) is increasing its current issue of about 50 Director Penalty Notices (DPNs) a day, notices which if not responded to promptly by recipients could have drastic consequences. Three: businesses should beware of fake ads promising quick and easy GST refunds. Four: are you having problems with the ATO’s debt call centre, which many users are claiming is ineffectual in dealing with enquiries about significant tax debts?
Perhaps in what follows you’ll find useful information about these four matters and what you may need to do about them.
Credit agency referrals
As the economy emerges from the Covid pandemic the ATO is ramping up credit agency referrals for the worst defaulters, and according to Credit Watch, the only organisation handling these referrals, many more thousands worth millions of dollars will come its way in the next few months.
Credit Watch CEO Patrick Coghlan says the ATO has been sending about 300 intent-to-disclose notices a week to businesses and will be increasing the disclosure rate of Tax defaulters in coming months.
He says the notices are going to businesses and individuals where required tax payments exceed $100,000, are more than 90 days overdue, and where there has been no engagement with the ATO.
“It will be interesting to see how long it is before many of these companies, whose debts we are reporting, go into administration. The ATO is aware that a possible avalanche of administrations could undermine business confidence. But it has given fair warning that the referral processes temporally suspended during the pandemic, would be reactivated, and steadily increased in months to come with the likelihood that referrals would be in the thousands by the end of the year.”
The ATO and big banks will be main drivers of business wind-ups that by then are expected to have reached the pre-Covid rate of about 8,000 annually.
Mr Coghlan says he expects the current probability of debt default rate of about 5% for all Australian businesses will climb steadily during the next 12 months, and that the rate for the hospitality, food and beverage sector will be “miles ahead” of all other industries.
Business owners hoping to keep the extent of their debt secret should be aware Credit Watch reports a recent 30% increase in requests by businesses for information on companies’ debts.
DPNs and the tax recovery drive
In fairness to the millions of taxpayers fulfilling their tax obligations but who are being disadvantaged by those who don’t, the ATO, as part of its post-Covid tax debt collection campaign, is increasing the issue of Director Penalty Notices (DPNs) from more than 50 a day, and referrals to credit agencies by hundreds.
DPNs following more than 52,000 warning letters have recently been dispatched to directors of companies with outstanding debts on PAYG, the superannuation guarantee charge, and GST.
Deputy Commissioner of Taxation Vivek Chaudhary says consequently there have been significant payments and establishment of payment plans that have saved taxpayers from escalation of the ATO’s actions against them.
“Our message is – don’t stick your head in the sand. Even if you can’t immediately pay the full amount owed, please contact the ATO or have your registered tax adviser get in touch with us to discuss a viable payment plan.
“Currently we’re prioritising debt recovery on taxpayers who have larger debts and are considered greater risks, but this will soon be widened to include debtors across all ranges.”
Beware of tax scams
Macks Advisory urges our clients and other taxpayers to be aware of fake ads that claim to be aids to quick and easy GST refunds.
The ads appear legitimate but most definitely are not, and we understand the ATO is trying to recover about $850m from fraudsters who have tricked people who don’t run a business into setting up an ABN and then submitting fictitious BAS statements to get a GST refund.
We understand the ATO has already stopped fraudulent claims for more than $770m before payment.
Tax agents should be on the lookout for unusual transactions, or requests for unusual advice from their clients.
Agents who have clients seeking advice about “a sticky situation”, who have clients who suspect their identity may have been compromised by a proposed arrangement they consider suspicious, should call the dedicated phone number 1300 130 017. The ATO is busy recouping money received fraudulently through garnishees, payment plans and freezing orders. You can confidently report suspected tax evasion or other tax crime to the ATO online, or by phoning 1800 060 062.
ATO debt call centre criticised
Macks Advisory understands many tax professionals believe the ATO’s debt call centre is wasting time and money.
If taxpayers have tax debts of more than $100,000, the centre lacks authority to approve payment plans proposed by callers – usually a lawyer, an accountant, or some other tax expert representing a client. And almost invariably much of a caller’s time and a client’s money are wasted in lengthy routine verification checks before it’s established the call, because it involves an amount of more than $100,000, has been pointless.
In any case, for a payment plan to be considered by the ATO it must be securitised, or documentation of a business’s profits and loses must be provided to validate the plan, which can’t be done over the phone.
We are aware of a lawyer who – because he knew his client ‘s tax debt was more than $100,000 -- recently tried unsuccessfully for more than 30 minutes to persuade a call centre operator, from the start of their conversation, to refer the call to some higher authority. The lawyer told the operator he understood the centre couldn’t deal with his client’s proposed plan because it involved more than $100,000, but the operator nonetheless ignored the request and would not budge from questions in a standard script about payment plans. Result: no resolution for the client and a bill for the lawyer’s wasted time.
If the ATO wants more taxpayers to heed its “engage with us” message, then it appears something needs to be done to improve efficacy of its call centre.
