‘Excessive’ ATO debt recovery measures a threat to business solvency

The controversial debt recovery tactics employed by the Australian Tax Office (ATO) have been called in to question by the Australian Small Business and Family Enterprise Ombudsman Kate Carnell.

A recent review by the Auditor General found that Australia’s 3.8 million small businesses currently owe nearly two thirds of collectable tax debt.  While the ATO’s debt recovery process is found to be ‘largely effective’ it is the heavy-handed debt recovery tactics ABSFEO, Kate Carnell warns against.

Controversial tactics such as Garnishee notices (allowing the ATO to forcibly remove money from the accounts of businesses and individuals without consultation and continue withdrawing as additional funds as they appear) have prompted the call for an immediate ban on the practice and legislative changes.

Kate Carnell warns of a “crippling impact on business”

“There’s no other outcome that is possible other than sending small businesses broke,” she said.  “It is simply unacceptable for the ATO to have the power to do that without any external entity giving or validating that power is a step too far.”

Under existing rules, the Tax Office can begin recovery of unpaid and disputed tax debts at any time, including when involved in a legal dispute – this puts businesses under severe financial pressure.  The report says the first knowledge some businesses have of a garnishee notice can be when banks do not honour payments for wages, rent, supplier invoices and loans.

For businesses struggling under the cloud of an ATO debt, the threat of garnishees, directors’ penalty notices, statutory demands and sequestration can indeed mean a fast track to insolvency.

Businesses can quickly find themselves in an untenable situation.  Many banks will not lend to businesses with an ATO debt meaning the business may be limited in not only their prospects for growth but also their day to day cash flow.

At Apricity, we don’t necessarily see an ATO debt as a problem.  If a business has set up and stuck to a repayment arrangement, then you may be approved as a customer.  Importantly, having our solution on call means that you may be able to clear your tax debt faster, thus clearing the way for more financing and growth opportunities.

Find out more about how Apricity can help here.