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The government has released new draft legislation that will allow small businesses to contest the ATO’s collection of disputed tax debt in the next steps to better address the power imbalance between small businesses and the ATO.
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ATO debt recovery changes to provide ‘safety layer’ for small businesses
19 January 2022
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This week the government called for feedback on the draft legislation that outlines a number of amendments to the Taxation Administration Act 1953 that increases the rights of small businesses to contest the ATO’s collection of disputed tax debts.
Speaking to Accountants Daily, Institute of Public Accountants' general manager of technical policy, Tony Greco welcomed the new proposed changes and said the new measures will provide additional security for small businesses, allowing application to the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery actions where the debt is being disputed in the AAT.
It will enable small businesses (i.e. businesses with an aggregated annual turnover of less than $10 million) to seek AAT orders that prevent the commissioner from taking debt recovery actions, like commencing winding-up proceedings or issuing garnishee notices, until the underlying dispute is resolved.
Under the draft legislation, the AAT would also be empowered to order the Commissioner of Taxation to offer instalment arrangements including 50/50 payment arrangements and to accept security in lieu of immediate recovery.
“Debt recovery can be quite debilitating on a small business. Pre-empting the outcome makes little sense and allowing some breathing space adds another safety layer into the system,” Mr Greco said.
“It gives the business owner the opportunity to continue running the business whilst the dispute is being addressed before the AAT.”
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Mr Greco noted that the new changes can form another good feature of the tax system to address the power imbalance between the ATO and small businesses.
This can also build on other good initiatives recently introduced such as the tax concierge service provided by ASBFEO.
“The Small Business Concierge Service helps small businesses decide if an application to the AAT for review of an ATO decision is an appropriate pathway to resolution,” Mr Greco commented.
“It will also increase the rights of small businesses to contest the ATO’s collection of disputed tax debt. It will bring Australia more in line with the tax systems of the UK and US.
“It can also provide a more cost-effective way to stop the ATO from pursuing small business tax debts before a disputed assessment has been resolved which is the fair thing to happen particularly in the case of a small business owner up against the might of the ATO.”
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