Tax

Small businesses demand overhaul of ATO powers to prevent “miscarriages of justice” on issues like garnishee notices

Emma Koehn /

Kelly O'Dwyer

Kelly O'Dwyer. Source: AAP Image/Mick Tsikas.

The federal government says it will investigate the Australian Taxation Office after a Fairfax and Four Corners investigation found small business people have been treated unfairly in the chase for revenue.

The media reports have claimed small business owners are being left stranded by the mystery cancellation of Australian Business Numbers and that there has been an increase in the issuing of “standard” garnishee notices to individuals and small businesses to take control of their bank accounts for the repayment of tax debts.

On Tuesday, Minister for Revenue and Financial Services Kelly O’Dwyer told the ABC she had requested a “thorough investigation” of these allegations, with the government to respond once a review had taken place.

The tax office has denied the reports are an accurate representation of its practices, while opposition leader Bill Shorten pledged Labor would investigate whether the ATO treats small businesses fairly.

For organisations like Self-Employed Australia, however, the revelations about the tax office’s alleged treatment of small business people are nothing new.

Self-Employed Australia has long argued that it is incredibly difficult for small business owners to argue against an ATO decision after it has been made.

On Wednesday, executive director Ken Phillips released a statement of demands from the organisation, highlighting six possible reforms that would address power imbalances between the tax office and small businesses.

The organisation argues small business owners are powerless against practices like the issuing of garnishee notices, because businesses are forced to pay tax debts even if they deny they have incurred them.

While these powers are necessary to stop taxpayers from ignoring their debts, Self-Employed Australia says the rules are not fair because the tax office is responsible for both raising the debt and handling any objections by the taxpayer.

How can the objection be handled ‘objectively’ when the same organisation is assessing an objection to its own decision?” the group asks. 

Revenue collection should be separate from dispute resolution

In its reform proposal, Self-Employed Australia suggests the tax office “be split in two”, so that one part of the organisation is focused solely on revenue collection, while another section is responsible for managing disputes and appeals.

It also recommends the government set up an independent “Small Business Tax Tribunal”, which would sit outside of the ATO and allow small business people bring their disputes before an independent arbiter.

This tribunal could sit within the Australian Small Business and Family Enterprise Ombudsman’s office, suggests Self-Employed Australia. This is an idea echoed by Council of Small Business Australia chief executive Peter Strong, who told SmartCompany on Monday the ombudsman’s office should be able to review big tax office decisions if they have the capacity to hurt small business owners.

In a statement this morning, Small Business Ombudsman Kate Carnell said the tax office’s small business office was doing a good job connecting with the community. However, she obsersed that “when the ATO does make a mistake or is behaving particularly heavy handed, it can take a long time to fix and the financial impacts are huge”.

“It doesn’t take long for a small business to go broke,” said Carnell.

The impact of garnishee notices is a key area of concern in the small business community, with Self-Employed Australia arguing that small businesses are placed at a “massive disadvantage” when the ATO collects debts in this way.

The organisation is pushing to change regulations so the tax office can’t issue a garnishee notice for any debt that is currently being disputed by the taxpayer.

The current situation “creates enormous circumstances for miscarriages of justice on a scale that cannot be accurately assessed”, it argues, because the tax office can strip a business owner of cash they might otherwise be able to use to fight their tax liability assessment in court. 

For its part, the ATO has continued to reject that its processes need review, remarking in a statement released on Tuesday afternoon that the Fairfax and ABC reports are “unbalanced commentary and opportunistic journalism, as well as ill-informed analysis of the facts”.

Got a story about your experience with the tax office or the issuing of a garnishee notice? Email [email protected]

NOW READ: Tax agent warns small businesses to consider sole trader status carefully amid ABN cancellations and ATO scrutiny

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.

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