Inside the ATO’s debt recovery agenda

This article was current at the time of publication.

The Australian Taxation Office (ATO) is bolstering its frontline operations activities in a bid to claw back around A$50 billion in outstanding tax debts and to achieve significant internal process improvements.

While the ATO has seen some stabilisation of its debt book over the last two years, it is now stepping up its normal active arrangements around debt collection to ensure businesses and individuals are meeting their tax obligations.

That’s a firm cue for tax practitioners to remind clients that the tax regulator will be moving more quickly to take action to recover debts, including using garnishee processes and director penalty notices.

Meanwhile, the ATO is heavily focused on implementing its own improvements that encompasses enhancements to existing processes, productivity, and upgrading its technologies available to tax agents, including the integration of artificial intelligence software.

Debt reckoning

David Allen, the ATO’s Second Commissioner, Frontline Operations, says the process of reducing the ATO’s debt book has involved retraining staff to have different conversations with taxpayers than during the COVID-19 pandemic, when the focus was tax payment relief.

“That time has passed and last year we were really quite clear into the community that we were resuming normal operations,” he says.

 “Our fundamental key message all the time is, if you have a problem, engage with the ATO, don’t put your head in the sand. And what we would like to do is then work through understanding [whether] you are in a position to sustainably pay your current obligations but also deal with the past debt.”

Allen says the ATO still offers a range of options to taxpayers who are unable to pay in full and on time, such as payment plans, deferrals, and remission of the general interest charge (GIC). Taxpayer engagement has allowed the ATO to issue many payment plans. “That remains our focus, to help businesses through that process,” says Allen.

Small business engagement

Allen says about 65 per cent of the ATO’s total collectible debt book has been generated by small businesses, with nearly 80 per cent of that debt related to Pay As You Go withholding tax, GST, and outstanding Superannuation Guarantee payments. 

“When we haven’t got engagement from businesses, and small business particularly, we will be moving more quickly to firmer actions,” he cautions.

Allen believes common blatant attempts on the part of small business to avoid paying tax is due to prioritising paying staff and other creditors over the tax office. 

“This is why we need to make this adjustment back to normal operations to make it clear to taxpayers and entities that they do need to prioritise payment of tax and super. If it’s a viable business, you can’t disregard your ATO obligations.”

Allen adds that tax practitioners should be playing a significant role in educating their clients on meeting their debt obligations.

“We would really appreciate tax agents educating their clients about the consequences of not paying their ATO debts, particularly... director penalty notices where the liability for the business gets passed to them individually.”

ATO moves to improve

The ATO is also taking steps in 2025 to focus on improving its own business processes, which Allen says falls into three key areas.

“We’ve got a big program of work looking at process improvements to try reduce the level of effort required but also to improve outcomes for taxpayers and for tax agents as well,” he says.

Allen says the ATO has been expanding the use of automation processes to remove some of that low level procedural work that staff was used to doing. Over the last six months the regulator has removed nearly 400 million workload seconds using automation processes.

Dealing with timeliness complaints

In an effort to improve productivity, the ATO has revamped staff training in the enquiry and processing space. It is reviewing its whole interaction strategy across different channels to modernise the way it deals with incoming work.

A key complaint is the time it takes to process lodged tax returns. Allen says one reason delays occur is when there are data errors. “It’s really important that everybody tries to get the data correct; that will obviously speed up the processing,” he notes.