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The Tax Office will be given additional discretion as to how it treats the billions of dollars in on hold tax debts.
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ATO to be granted greater discretion over old tax debts
14 May 2024
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The government plans to make amendments to the tax law to provide the Commissioner of Taxation more discretion over the treatment of old tax debts on hold from before 1 January 2017.
The budget papers state that under the proposed amendments, the Commissioner of Taxation will be given discretion to “not use a taxpayer’s refund to offset old tax debts, where the Commissioner had put that old tax debt on hold prior to 1 January 2017”.
“This discretion will apply to individuals, small businesses and not-for-profits, and will maintain the Commissioner’s current administrative approach,” the budget papers stated.
These changes will decrease receipts by $158.7 million and increase payments by $122.3 million over the 5 years from 2023–24.
The ATO began contacting taxpayers about debts previously classed as uneconomic to pursue last year, advising them that the debts would be offset against future refunds.
This was in response to an audit by the Australian National Audit Office that found the ATO’s approach in relation to these debts did not conform with the law.
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The ATO’s approach to collecting these debts on hold received considerable backlash from tax agents, the community and the Inspector-General of Taxation Ombudsman.
Former ATO Commissioner Chris Jordan said one of the options for the ATO to request a reprieve from the Minister of Finance in relation to the debts.
The government has also announced in the budget that it will extend the ATO’s Personal Income Tax Compliance Program for one year from 1 July 2027.
“This extension will enable the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including overclaiming of deductions, incorrect reporting of income and inappropriate tax agent influence,” the paper said.
“This will enable the ATO to continue its focus on emerging risks to the tax system, such as deductions relating to short-term rental properties.”
This measure is estimated to increase receipts by $180.3 million and increase payments by $44.3 million over the 5 years from 2023–24.
The government also plans to extend the ATO Tax Avoidance Taskforce for two years from 1 July 2026.
“Extending the Taskforce ensures the ATO continues to be well-resourced to pursue key tax avoidance risks, with a focus on multinationals, large public and private businesses, and high-wealth individuals,” it said.
“This measure is estimated to increase receipts by $2.4 billion and increase payments by $1.2 billion over the 5 years from 2023–24.”
The Tax Institute chief executive Scott Treatt said from a tax perspective, it was very much a “compliance focused Budget”.
“We saw a lot of extensions of taskforces and activities around fraud,” said Treatt.
“The Tax Institute has long called for more certainty in the funding of the ATO rather than relying on these task forces. We need to ensure that we get the right resources into the right areas so that the ATO can provide the right advice and guidance for certainty in the tax system.”
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