Small Businesses be alert - The ATO has you in its sight.

Posted by Malcolm Campbell on 21 July 2015

Small business is very important to our nation’s economy.  With approximately“93% having a turnover of less than $2 million per year, small businesses produce around 39 per cent of Australia’s industry value added and employ almost half the non agricultural workforce” (Tasmanian Small Business Council, 2015).  However, this important sector is also currently being targeted by the Australian Tax Office in their debt recovery efforts, accounting for 60% of the $20 billion collected in tax revenue in the 2010-2011 to 2012-2013.

Recent media reports have focused on the overly aggressive and unreasonable approach that the ATO appeared to be taking in recent time against SMEs. In a recent report on debt collection activities of the Australian Taxation Office, Inspector-General of Taxation, Ali Noroozi said a review “was prompted by concerns by individuals, small businesses and tax and insolvency practitioners with the consistent escalation of tax debt and unfair recovery actions taken by the ATO”.   He has put forward recommendations which focus on “preventative strategies and softer action more frequently and earlier to avoid need to take more firm action down the track” (Report on Review into Debt Collection by the ATO).

Considering these recommendations, what can a small business do when confronted with the increasingly aggressive approach towards SME’s by the ATO as seen in recent times.  Our firm has assisted many businesses over recent years who find themselves with prolonged outstanding tax debt.  By this stage, there is often very little room for negotiation, especially if the ATO has  already commenced legal proceedings against the business.  The ATO have no consideration to a business or their operator’s personal circumstances with the ATO escalating the debt collection process one step after the other when the outstanding debt is not repaid.

Obviously, to avoid the heavy handed tactics the ATO employs in their debt recovery, payment of outstanding monies is the best option.  However, when cash flow prohibits payment of the outstanding debt being dealt with, acknowledgment of the problem, early action and seeking legal assistance is the most efficient method of dealing with the situation.  Early communication with the ATO about the situation (either through their accountant or lawyer) will often mean significantly less time, effort, stress and cost to a business already suffering.  The last thing most small business owners want is for their business to be wound up by the ATO. 

Should you find yourself in a situation where you know you will not be able to fulfil payment of your BAS, Company Tax or other payments due to the Australian Taxation Office, take action promptly.  Talk to the ATO first to see what payment plan could be put into place.  Should the situation escalate and you require assistance with handling the matter, contact Dooley & Associates on (02) 9890 4755 to assist you.