ATO guide for business owners and tax practitioners

Garreth Hanley:
This is With Interest, a business, finance and accounting news podcast brought to you by CPA Australia.

Jenny Wong:
Welcome to With Interest. I'm Jenny Wong. Today we're talking about some of the key challenges facing accountants in their dealings with the ATO and what you can expect in 2025. Joining me is David Allen, the second commissioner of frontline operations at the ATO. David will help us untangle some of the taxpayer service issues and share his insights on how they'll be addressed.

Welcome to With Interest, David.

David Allen:
Thank you, Jenny, and thank you for the opportunity to come along today.

Jenny Wong:
David, we have all heard about the ATO stepping up its debt collection efforts and the $50 billion of outstanding debt. And there's talk of garnishee processes and director penalty notices being issued. Could you explain in more detail what this means for businesses and individuals who owe tax debts?

David Allen:
Yes. Thanks, Jenny. And look, the tax debt is definitely a priority for the organisation. It's something the commissioner has called out and I’m coming in as well. The debt book did double over the COVID period from about $25 to nearly $50 billion. And of that debt, 65% is owed by small business. The positive news is that we've actually stemmed that growth. And we're starting to see payment come back on and we're starting to see trending down in the debt book, which is very positive. I think it’s also worth noting as well that the majority of taxpayers do pay and lodge on time. Also, most of the debt in the debt book is self-assessed. So, it's pay as you go withholding, GST and super guarantee.

And I think even more importantly, 22,000 taxpayers are responsible for $11 billion of the total tax debt value. In context, that's around 1% of the total debtors responsible for about 20% of what's owed. So our focus at the moment is very much around poor payment behaviours that unfortunately did tend to get somewhat normalised through the pandemic. For us, that's really important because not paying your debt creates an uneven playing field and has a really big impact on other creditors. We play a really important role in the economy, and I've seen lots of cases come forward to me. The thing that really strikes me the most is the impact on other creditors in the system.

So when we're not in there taking action and holding these businesses to account, it has a real significant impact on others. I think that for us, the bottom line is we really want you to engage with us early. Ensure that you can either pay in full or get a payment plan. The reality is if you don't engage with us, we will move to firmer actions such as director penalty notices and garnishees. And also, and I think this is a bit of a change, we will do it in more of a timely manner because the key lesson coming out of COVID was that we allowed too many businesses to have multiple payment plans, which they failed. There was too much correspondence, and unfortunately, that debt has accumulated and those businesses are now in quite a bit of difficulty because of the extent of the debt.

Jenny Wong:
Right. So the priority is always engagement before enforcement, but where debts remain unresolved without communication, stronger action such as garnishee notices and director penalties may follow.

David Allen:
Absolutely.

Jenny Wong:
I understand that small businesses are responsible for about 65% of the ATO's total collectible debt book. What do you think is driving this trend, and what advice would you give to small business owners who may be struggling to meet their tax obligations?

David Allen:
So I think it's again always worth reiterating that the majority of taxpayers do the right thing. On-time payment for small businesses is around 69%, with 81% paying within 90 days, and 66% of that debt is self-assessed. Why the reasons people aren't paying, there is a real full spectrum, and there’s lots of complexities in there, but maybe I would just summarise it into three groups.

I think the first one is around short-term challenges, and that is really just businesses managing cash flow, and we see that they ultimately pay, sometimes a little bit late.

The second is a group of businesses with a historical debt that potentially has accrued through COVID. They are dealing with current obligations and payments while also trying to manage their legacy debt.

The third bucket is very much about deliberate non-payment. I again I see many different cases that come across my table of taxpayers who literally decided not to pay any tax, even though they continue to lodge, and we can see their tax liabilities increasing.

So for the first group, or first and second group — those with short-term or historical debt — the key message from the ATO is don't put your head in the sand. Engage with us early and set up a payment plan that addresses the existing debt before the next obligations come due. We can also provide additional time for taxpayers to seek advice and registered tax practitioners or financial counsellors as well.

I was reminded, as I was thinking about coming to this podcast, that the vast majority of taxpayers are doing the right thing. So far this year, we've issued over 446,000 payment plans to small businesses. So definitely the majority are doing the right thing and engaging with us.

Unfortunately, and this is the third category, those that don't engage with us, we will progress to firmer actions. We've got a whole series of firmer actions, including DPNs, Director Penalty Notices. We are increasingly doing disclosures to credit reporting bureaus, garnishees, and also wind-ups as well.

The other thing to note is we're increasing our resourcing and the skilling of our staff in these areas so that we can ensure that there is actually consequence for non-payment. Possibly in the past we weren't so strict around the follow-through, but definitely we are focused on that at the moment.

Jenny Wong:
An issue that gets raised with us more and more is in relation to general interest charge remission requests. We’ve noticed a significant shift in the ATO's approach to GIC remissions over the past year. Previously, remissions were often granted in similar circumstances, but now they're more likely not to be granted.

We’ve heard of cases where materiality considerations don’t seem to be taken into account in the approach to requests for GIC remissions as well.

I've heard concerns that tax agents may be at a disadvantage compared to clients when making the same request for GIC remissions or setting up a payment plan. Could you comment on what steps are being taken to ensure consistency and fairness in decision making?

David Allen:
Thanks. Definitely those comments you've just made are definitely things we hear as well. Look, I think the starting point with GIC is just to remind ourselves that it's a really important part of the overall tax system and the GIC rate has been deliberately set high to encourage the timely payment of tax and to ensure that we aren’t providing an unfair advantage to those who pay on time and also to ensure we compensate the community for the cost of late payments.

Through the pandemic, and it was appropriate at the time, we were remitting nearly nine out of ten requests for GIC remission and unfortunately, it stopped becoming an incentive to payment and we've seen it obviously in the way that the debt book is at the moment.

So it is appropriate for us to pull back on this rate of approval but at the same time continuing to support those people with genuine circumstances.

With regards to your question around is there a difference between agents and taxpayers contacting us to get some preference, there is no policy that preferences taxpayers over agents.

However, we have heard back from the community about the inconsistency and it's something we obviously need to address. I think the other thing to also consider is that the GIC requests are considered by our junior staff across multiple sites and multiple teams.

Taxpayer circumstances are all very different, and I've been reviewing and looking very closely at the guidelines recently for the GIC. It's really clear that they're very much open to interpretation. So I suppose in a way I'm not surprised that there may be perceptions of inconsistency.

This is an area that I really want to focus on, and I've set up a small team to start reviewing the whole GIC remission process. Really fundamentally looking at the guidelines, our staff training and some decision tools as well.

What I'd like to be able to do is provide much more transparency so agents can actually understand whether they're likely to get a GIC remission or not, and that we can be much more consistent in how we apply that remission.

We will be, this year, consulting with tax agents over this review of the GIC, and we really welcome agents' input into how we can make this whole process better.

Jenny Wong:
There are growing complaint volumes relating to ATO service, with 42.5% of complaints received this financial year coming from tax agents. Could you outline what you're seeing as the top categories for tax agents submitted complaints and explain a bit about how the ATO are addressing these pain points?

David Allen:
The good news is we're starting to see a drop in complaints from tax agents year on year, and this is a trend that I want to continue. I'm very interested in complaints and I meet fortnightly with my complaints team and we go through forensically about what's happening in the system, what are the drivers and where we can take action.

The most common complaints are about probably four or five things. The first one is progress of returns, replacement refunds, copies of documents, and taxpayers with compromised accounts. What I can say is across all those we're taking action in one form or the other to really try and improve those processes. Maybe I might just touch on a few of the things we're doing that are addressing some of those. So I suppose the big one is around timeliness and probably the majority of all our complaints across both tax agents and other taxpayers relate to timeliness. And so we've had over the last 12 months a major program to increase our capacity across our processing area in particular, and I'll talk a little bit later on just about some of the business improvement, but we've made significant strides on that front. So just to give an example, around 21, 22, we had nearly 550,000 processing items on hand.

This week we've actually got that around to around 270. And what we'd say during a normal month, we'll churn around 250,000, 260,000 processing items. So we've made a lot of effort to try and really tackle that timeliness issue, but we've still got some way to go. And the focus at the moment is now looking through those 270,000 and really understanding what are the aged ones and understanding why they're becoming aged. And what we're seeing is there's a whole range of issues in there, including some issues sometimes with our own procedures where things just go in loops, but there are also things such as we're waiting on from another part of the ATO to actually respond to us, or sometimes we're actually waiting for clients to come back to us as well. So we're doing a lot of detailed work on that processing part of the organisation to really sort of get that better under control. So I'm hoping over the next 12 months, that we can really start to see some changes in that timeliness issue.

Another one is around replacement refunds, and these really result from us needing to send a cheque out to agents, and this is where the account details are not correct, and so the system automatically sends a cheque out. We know that isn't the preferred way that agents want to get that refund, and so therefore they are required to then contact the ATO to ask for a replacement refund with some new account details. This is a tricky one, and we really want to work with agents to help how we can ensure that those account details are actually right at the beginning, because it obviously saves us a lot of time and energy as well in terms of the reverse workflow.

The last one maybe just to mention is around compromised accounts. This is a really challenging area. We've seen a huge growth in fraud and other issues to do with identity and this has had a really big impact on us in terms of managing it. We've got increasing numbers almost year on year in terms of people ringing out and say they feel that their account has been compromised. So we've been doing a lot of work this year, actually over the last six months, to really understand how we can better classify what that type of event is and have some much quicker procedures for how we deal with it.

We'll still always have a case, a group of cases that are like true third-party fraud, but what we want to be able to do is ones where there isn't third-party fraud, we've got really quick and clear ways to be able to deal with that. So I'm expecting again over the next like three to six months that we actually start to get through a lot of those compromised accounts and treat them and new ones that are coming in will be much quicker to be able to resolve them as well.

Jenny Wong:
We've heard the ATO undertake process improvement in frontline operations and implementing new technologies, including artificial intelligence software, to improve its processes and productivity. Could you tell us more about these initiatives and how they will benefit taxpayers and tax agents?

David Allen:
Business improvement is really a very major focus for me within the group because we are really facing increased telephony, increased processing and I talked before about the dev manager. So we've got to continue to do the business improvement so we can deliver the services we're currently delivering. I've created a whole business line in our group to drive that business improvement and they've got three key focus areas. The first one is around process improvements. It's long overdue but we've got to look at all our procedures and policies and streamline them.

We've got to take out parts of the processes that aren't adding value and ensuring that we can reduce things such as average handling time for both telephony and processing but also hopefully improve the client experience as well. The second key area is around our automation and so we've been deploying robots and other automation tools across our business for a number of years, but we're absolutely stepping it up now to really try and take some of that low value processing work that our people do every day and get tools to do that for them.

In the last nine months to date, we've actually taken away nearly five to six hundred thousand workload seconds, which is a savings for us to then reinvest in answering calls, processing and so on. So it's a really important part of what we're doing. A little bit over the horizon is our third stream, which is around technology. And we're just in the process at the moment of really building our sort of future technology plan or our frontline group that will take us out over the next five years. And in that, we're really thinking about how we can invest further in things such as the ATO app, online services for agents, so we can actually provide the tools to tax agents and taxpayers to be able to self-serve as well.

We've probably been on a little bit of a hiatus since we've done that, so definitely need to continue to do that investment. And then the second part of that is around a new contact centre. Our current contact centre falls out of license over the next few years. And so we're just in the process at the moment of looking at like, what are the business requirements for their contact centre? And this is really exciting about where we can actually deploy some AI in there to actually support taxpayers and agents in terms of contacting us, but also in terms of speeding up processes and transactions for our staff as well. So we've just been doing a lot of review of other organisations, the way they're using AI in call centres, and as I said, really exciting and I think that offers a lot of opportunities for us down the track.

Jenny Wong:
In Commissioner Rob Heffron's opening statement to the Senate Economics Legislation Committee a couple of weeks ago, he mentioned the implementation of a vulnerability capability to better support those experiencing hardship. Could you elaborate on how the ATO differentiates between taxpayers who are deliberately non-compliant and those facing genuine vulnerabilities? In addition, how does this vulnerability capability framework ensure that enforcement actions are applied fairly and empathetically?

David Allen:
The whole vulnerability issue is a very difficult and challenging area because what it does is it crosses over financial hardship, domestic abuse, fraud and so on. And the ATO, like any other large organisation, we're really working hard to think about how we can better manage these issues. Right now we're tackling this through a number of approaches and to start with we're focusing on the basics.

So the first one is really around working with our staff because remember our staff are sometimes the first point people connect with through our call centre. So ensuring that all our staff are best placed to identify and respond to vulnerable circumstances that may impact on how well positioned taxpayers are to meet their obligations. And we've also got dedicated teams to really focus on those complex cases, triage them and manage them through the ATO.

The other big initiative over the last six months has been around how we're working with industry advocates and they have called out for an ability to be able to better access the ATO. So we've created an advocacy help desk and this is a direct channel for financial counsellors and national tax clinics who need to talk to ATO staff, sometimes while they're meeting with clients. However, there's still a lot to do.

Through the vulnerability framework we're looking to think about how we can better administer our enforcement actions because sometimes that's where the rubber hits the road when clients are sometimes for the first time realising they've got a liability, say through a DPN.

We're also looking at our First Nations experience, connections to other government departments because these people are often talking with other parts of the government. Treatment specifically for people suffering domestic violence and also how can we help people with POI. I was recently on the Indigenous helpline and I was really listening to how it is sometimes for some Indigenous people to actually have the paperwork to demonstrate over the phone who they say they are.

So how can we help and facilitate people in those situations? So as I said, we've got some measures that we've already put in place, we've got more to do as part of that framework, but it's definitely a focus for both the Commissioner and the organisation more broadly.

Jenny Wong:
You mentioned that timeliness is a key complaint driver for the ATO. Our members have been telling us they are experiencing considerably longer wait times than in the past, where wait times were previously one to three minutes, they are routinely 10 to 15 minutes or longer in some cases. This inefficiency creates significant delays for practitioners trying to assist their clients. Could you elaborate on what causes these delays and what specific steps are being undertaken by the ATO to address this issue?

David Allen:
As I mentioned before, we have increased calls. So year on year, our calls continue to increase and we've got increasing processing volumes. We've just got more people in the country. There's more entities and individuals that we need to do this processing. So there's always pressure on the system in terms of the amount of work that we've got to deliver.

And what we do is we try and manage our workloads as best as we can. And we're always juggling to try and optimise around that. And Jenny, I'd be really happy to take you to our sitein Melbourne that’s got the huge displays where our people are actually coordinating all the telephony calls. It's very, very interesting.

Unfortunately, sometimes we need to extend some of these wait times because of different demands that may be occurring through the day, but also to ensure we've got coverage from all our calls. So we've got about 51 different call lines and some of them are very bespoke and some of them are more general. And we need to make sure that we've got our people with the right skills matched to those calls. And you can appreciate this is quite a challenging, task to do through the day and every day.

What I can say is the tax agent calls are still prioritised. We don't apply any call blocking to them. But it is true that the wait time has slightly extended some maybe from what it previously was, but at the moment, it's around seven minutes. And that compares from an average wait time around 80 minutes for general calls. And I think last year was about six minutes. So it's about the same six or seven minutes for tax agents. I should also note as well that we have callbacks available for tax agents for some times during the day.

However, it's also important to think about where we want to be. And as I was mentioning before, we've got a program of work to look at what are transactions across the system. We want to see how we can further invest in the online service for agents. We really, and I'm sure tax agents don't really want to be calling us. So what's the gap there that we need to provide on the digital services to be able to support them.

We also know there's a lot of calls related to paper. We've got a major program to try and digitise our remaining paper. We talked about business improvement and also AI potentially in telephony as well. The final point I would just make is that the Inspector General of Tax has also initiated a review of tax agent help line. And we're really keen to work with her to see what recommendations she makes so we can better make sure that our resources are deployed in the best way possible.

Jenny Wong:
Finally, what advice would you give to tax practitioners who want to educate their clients on meeting their debt obligations and avoiding further penalties?

David Allen:
Thanks. And look, I think there's probably four key points that I'd like to leave. I think the first one is, if they can pay, please do. And if they can't pay, don't ignore it. Act now, check if you can put a payment plan in place. Otherwise, reach out to us to get some help.

There are some options available, but the worst thing is to put your head in the sand. The second one is, and this is really, I think our key learning from COVID is don't let those obligations of pay as you go with holding, GST and super guarantee accumulate. Our experience is it's very difficult for businesses to actually like, you know, deal with legacy debt while they're actually managing the current obligations.

And you can see that sometimes in our payment plans where only 50% of small business adhere to a payment plan at the 12-month period. So really got to focus on not allowing those obligations to sort of accumulate. The third one is that, and this is a really important point for your members to hear, is we will be focusing on those debts and we will be taking firm action earlier. And that is a bit of a shift.

We will be taking it early because we don't want businesses to accumulate large debts that are unsustainable. So we will be taking it early to make sure that they actually address those debts early on. And then the last point, and again, I see lots of cases where directors get surprised, but we are increasingly taking action on entities and directors who don't respond to DPNs.

And directors have got to understand that they've got a responsibility in terms of how that business is being run, what their liabilities are and their obligations, and that they will become personally liable for those liabilities if they aren't managed. So the final point is DPNs are very important instruments. Please make sure your clients understand what the implications are for them.

Jenny Wong:
That brings us to the end of today's episode. Thanks for joining us today, David. It's been really good having you on the show. Our members will really appreciate the comments you have made, so thank you.

David Allen:
Well, thank you, Jenny. And as I said, I really appreciate the opportunity to come along and share these messages. And as I said, you know, like we are, the ATO is there and willing to support people. Always make sure you contact us if you have any problems and we'll work those through.

Jenny Wong:
Thank you for joining us for this discussion with David Allen from the ATO. We hope you found the information valuable as you navigate your interactions with the ATO in 2025. Be sure to check the show notes for links to additional resources, including further ATO publications and CPA Australia materials. If you enjoyed this episode, we encourage you to subscribe and share With Interest with your colleagues and peers in the business, finance and accounting community. Until next time, thanks for listening.

Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover With Interest by leaving us a review and sharing this episode with colleagues, clients or anyone else interested in the latest finance, business and accounting news.

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