The Australian Taxation Office (ATO) has announced a tougher approach to debt collection for businesses that continuously ignore payment reminders, with a focus on those who fail to pay tax and super obligations. In a recent statement, the ATO warned that businesses and directors unwilling to engage in resolving their debts will face heightened enforcement measures, including director penalty notices (DPNs) and garnishee orders.
Why the ATO is Taking a Tougher Stance
With business tax debts rising sharply since the COVID-19 pandemic—from $26.4 billion in 2019 to over $50 billion—the ATO aims to level the playing field by holding unresponsive businesses accountable. “Not paying tax affects everyone,” the ATO stated, highlighting that unpaid tax and super debts put compliant businesses and employees at risk.
What Directors Need to Know
The ATO’s new approach specifically targets directors with unpaid GST, pay-as-you-go (PAYG) withholding, or employee superannuation liabilities. Directors of multiple companies are under increased scrutiny, as the ATO plans to assess and pursue the total debts across all related entities.
“If these directors don’t take action, we can recover these amounts directly from them, putting their assets at risk,” the ATO said. The agency has issued a record number of DPNs, with 26,702 notices worth $4.4 billion issued in the past year—a 50% increase from the previous year.
What Businesses Can Expect
Businesses that ignore payment reminders can expect swift escalation in enforcement actions. These may include:
- Director Penalty Notices (DPNs): Personal liability notices directed at company directors, enforcing payment of outstanding tax and super.
- Garnishee Orders: Legal orders allowing the ATO to recover funds directly from a company’s bank accounts to settle unpaid debts.
The ATO urges business owners to respond to their reminders, noting that “if they can pay, they should, and if they need more time, don’t ignore it.” Businesses experiencing genuine financial hardship are encouraged to reach out to the ATO early to discuss options such as payment deferrals, interest remissions, or compassionate super release.
Options for Businesses Facing Financial Hardship
For those struggling financially, the ATO offers several support options, including:
- Payment Plans: Flexible arrangements to allow businesses to manage repayments over time.
- Interest Remissions: Reductions or waivers of interest on overdue payments for those in financial difficulty.
- Deferred Payment Dates: Extensions on payment deadlines, especially for those facing significant cash flow issues.
Take Action Now to Avoid Penalties
The ATO’s message to businesses is clear: take proactive steps to address tax debts, or face increasingly severe consequences. Businesses are advised to set up payment plans online or reach out directly to the ATO for assistance before penalties escalate.
By adopting a tougher stance, the ATO aims to protect the integrity of the tax system, ensuring that businesses fulfilling their obligations aren’t placed at a disadvantage. For directors and business owners, this serves as a reminder to stay engaged with the ATO and seek support when needed to prevent long-term financial impacts.
