Small business and taxpayers wrongly targeted by tax office to get compensation

The Australian Taxation Office debt recovery system is expected to undergo a shake-up in a win for small business owners and individual taxpayers.

Taxpayers pursued by the Australian Taxation Office are set to benefit from sweeping changes to the debt recovery system.

Compensation owed to small businesses and individuals wrongly or unfairly pursued by the ATO will be paid in a more expeditious manner, The Australian reports.

In addition, the way any debt is collected will be overhauled, with the ATO accused of being heavy-handed in its handling of these cases.

Recent statistics show an increase in the number of complaints against the ATO and the government says it will adopt all 12 recommendations of a review of the treatment of small business tax cases.

The scheme would make it easier for small businesses to apply for compensation and ensure improved oversight of ATO cases.

Failing to lodge tax returns annually could end up leaving Australians with massive debts running into hundreds of thousands of dollars.

ATO data has revealed some worst-case scenarios of taxpayers who were left saddled with hefty debts because they did not keep their financial affairs up-to-date.

The ATO said:

• An individual failed to lodge returns for 19 years and had tax debts of more than $200,000 including interest. About 17 months on the person was still paying back the debt.

• A person failed to lodge returns for 16 years and accumulated a tax debt of nearly $300,000. Within months they declared bankruptcy.

• A person failed to lodge for three years and was left with a tax bill including interest costs of more than $100,000. Half of the debt was repaid when the lodgements were brought up-

to-date but interest has continued to accrue on the remaining debt.

The Tax Institute’s Stephanie Caredes said failing to file your tax return on time can end up being costly. Picture: Damian Shaw

If you are filing your own return, the deadline was on October 31. However, if you are choosing to engage a registered tax agent you could lodge up until mid-May 2020.

For those who still need to lodge from previous years, an ATO spokeswoman said it was never too late.

“Even if you missed a return from over 20 years ago we will be able to process it,” she said.

MORE NEWS

Why it's easier to do your own tax

Weird and wacky claims at tax time

Self-employed Australians are among those who sometimes fail to lodge their tax returns annually.

In some instances the ATO may actually owe you money.

“If you lodge a prior year return that results in a tax refund, and you have no existing liabilities with the ATO or with other government agencies, the ATO will still issue you this refund,” the ATO spokeswoman said.

“One taxpayer lodged their 1996 income tax return this year. In August we paid them a $368 refund.”

H&R Block director of communications Mark Chapman warned those who had let their tax lapse for years could be looking at “serious financial implications”.

“You really need to have a professional involved who can negotiate with the ATO and investigate whether there may be legitimate reasons why you failed to lodge, such as ill health or deaths in the family,” he said.

[e-mail]

@sophieelsworth

TAX TIPS

• The deadline for self-lodgers was October 31.

• Most individuals using an registered tax agent have until May 15, 2020.

• Much of your personal information will be included in prefill data.

• Gather all relevant information including income statements, shares, rental property income, foreign income and private health insurance.

• If you need to lodge previous years’ returns do this asap.

• Always be honest when lodging.

• You can track the process of your refund through your myGov account.

Originally published as Small business and taxpayers wrongly targeted by tax office to get compensation