ATO to be granted greater discretion over old tax debts

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.

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.

Author

Peta Stephen