Australian Taxation Office (ATO) commissioner Chris Jordan has fired back at an investigation into tax office debt-recovery powers, saying he’s concerned small businesses will be “alarmed” by the findings.
Small business ombudsman Kate Carnell yesterday released a report detailing “excessive” use of ATO recovery powers in cases where businesses are disputing their tax debt, claiming garnishee notices are sending people out of business.
The seven-week investigation found the ATO used its debt-recovery powers in at least 12% of cases where an active Administrative Appeals Tribunal (AAT) case was underway in 2017-18, making a series of recommendations for improving oversight of the tax office.
But in a statement posted to the ATO’s website, Jordan said he wants to ensure business owners aren’t alarmed by the findings, reiterating the tax office only pursues a disputed debt in “exceptional circumstances”.
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“We are talking about low numbers here. There are 3.8 million small businesses in Australia, and I want to ensure that that these figures are not extrapolated or manipulated,” he said.
“These are cases that went to the AAT, and as such have unique characteristics, that do not reflect the broader small business population.”
Jordan said the ATO took garnishee action in four of the 17 cases where it pursued disputed debt in 2017-18, with almost $5 million owed to taxpayers.
Revealing the cases were “highly unusual”, Jordan said one involved a tax agent with a “chequered history” of fraud and evasion, while another was referred by Australian Customs and Border Protection because of allegations of criminal activity.
“The fact is that collectively, small businesses owe $15 billion in tax debt, which accounts for almost two-thirds of all debts owed,” Jordan said.
“This is growing year-on-year and we have a legislative responsibility to collect tax debt.
“When a customer of a small business pays GST on a purchase, or when an employee of a small business sees income tax withheld from their pay packet, it is our job to ensure that the tax is passed on, as this was never the small business’ money,” he said.
The statement puts Jordan at odds with Carnell, who yesterday disputed the ATO’s assertion the use of debt recovery for disputed tax bills was “very rare”.
“When you think about the outcomes of these results, of these sorts of practices, that’s an extraordinarily high figure,” Carnell told SmartCompany.
Small-business accountant Lisa Greig, founder of Perigee Advisers, says the ombudsman’s report is further evidence of frustration from businesses about inconsistency in the ATO’s approach to pursuing tax debt.
Greig says ATO discretion over how tax debt is pursued creates confusion for businesses and needs to be addressed.
“You have to be able to disagree and put things on hold,” Greig tells SmartCompany.
“If there’s a dispute, give the taxpayer the benefit of the doubt until the dispute is resolved.”
One of the key recommendations in Carnell’s report was for the incoming government to change the law to allow small businesses to apply for a stay on ATO debt-recovery action if they have an active AAT dispute.
Further, the report recommended more checks be placed on ATO garnishee power, such that a third party, such as a court, would need to approve garnishee activity.
Jordon said the ATO will consider the recommendations, not committing to supporting any aspect of the report.
“There are seven recommendations and we will give consideration to these, in the context of our role in finding the balance between ensuring we support honest businesses exercising their dispute rights, while not rewarding deliberate non-compliance,” he said.
“Managing tax debts and disputes are complex endeavours, and we are always looking to improve.”