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Tax agents have been told to readjust their expectations around payment plans and penalty remissions as the ATO toughens its approach to tax debts.
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ATO takes ‘stringent’ stance on GIC remissions as part of debt clampdown
22 April 2024
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The ATO has said that too many tax professionals are looking to secure payment plans and penalty remissions for clients when their clients are not in “genuine need”.
Speaking in a recent webinar, ATO assistant commissioner, lodge and pay, Sylvia Gallagher stressed that payment plans were not a loan to businesses and were only there for those that needed genuine support.
“We expect those who can and do pay on time to do so. I listen to a lot of phone calls and watch a lot of processing and there’s an expectation that payment plans will be granted and that they will be three-year payment plans and the minimum amount of payment for pretty much each of the clients that tax agents call up for,” said Gallagher.
“That may have been okay during Covid but that’s not okay anymore. A payment plan isn’t there as a loan. It’s not there for businesses who actually can pay and lodge on time to help them keep that money in their account.”
Gallagher said payment plans will only be granted where the taxpayer can’t pay on time.
“Paying tax isn't voluntary. It is something that is an obligation for all Australians who earn an income,” she said.
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She also stressed that the ATO expects those who can lodge on time to do so and before the due date and those who can pay on time to do so.
“So, we will be more stringent in asking questions about capacity to pay and we will be more stringent in looking at general interest charge (GIC) remissions,” she warned.
“We’re getting a lot of tax agents call up and say their client has paid off payment plans and are then asking for a GIC remission. Well, why? [The fact] that the payment plan was paid off is not an excuse to get a GIC remission.”
Gallagher said by allowing GIC remissions for those who chose not to pay on time, the ATO would be creating an uneven playing field.
She noted that PS LA 2011/12 sets out in what circumstances it is reasonable for the Tax Office to grant a GIC remission.
“We absolutely will in those cases. [We look at factors such as] did the client have control over the late payment? If they didn't, then obviously we can remit. But also did they make steps to reduce the payment? Is it fair and reasonable to be able to grant that remission as well?” she asked.
Gallagher said the ATO’s debt book was still increasing at unacceptable levels and has now reached $52 million.
“Of the 52 billion, small business make up the majority of that debt, around 90 per cent. So, we do want to make sure that we can help businesses get back on track,” she said.
“It is really important that lodgements and payments are up to date so that we can understand where a business might be struggling and we can go out and help them.”
She noted that the ATO has many services to help small businesses, individuals and tax agents.
“We encourage that they're used because if we can't see what's going on, we think that you're just ignoring us and that you don't want to engage,” she said.
“So, it's really important that lodgements are kept up to date, payments are kept up to date, and that the trajectory that we're on is slowed. We need to slow the trajectory of the debt book.”
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