ATO warns of increased debt collecting with $33.5b in tax missing

The ATO will be chasing those with outstanding debts much harder in the coming months, with 20,000 Aussies already paying back $4 billion.

The Australian Taxation Office has revealed that a lack of tax compliance is costing the nation $33.5 billion.

Its latest data shows that the tax gap adds up to $10 billion alone for the 2018/19 financial year.

ATO second commissioner, who is part of the client engagement group, Jeremy Hirschhorn, said that its most recent figures showed 93 per cent of the country was tax compliant overall.

This included 2 per cent where the ATO had launched compliance action against them but this still left a tax gap that added up to $33.5 billion.

However, small businesses accounted for as much as $15 billion of the tax gap.

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There is a $33.5 billion tax gap right now. Picture: Getty Images

Mr Hirschhorn said some of these businesses exist in a “shadow economy” meaning they don’t report income from legal or illegal practices, but the ATO was focused on bringing these companies into the system to make them accountable

“Quite rightly, the community is concerned that large companies ‘pay their fair share’, and I am happy to report that the ATO, supported by special funding under the Tax Avoidance Taskforce, has been highly successful in holding the largest companies to account, with performance after compliance action of around 96 per cent, and a residual gap of circa $2 to $3 billion,” he added.

When it came to individual taxpayers, Mr Hirschhorn identified three main problem areas. These included overclaiming of work expenses, property investments including listing on Airbnb at an “exorbitant” rate just for show and cryptocurrencies and NFTs.

Australian Taxation Office second commissioner Jeremy Hirschhorn. Picture: AAP Image/Mick Tsikas

Mr Hirschhorn noted that the total ATO collectable debt book has grown significantly during the Covid pandemic and it is looking to normalise this over time.

“We are also working to engage with taxpayers earlier and more transparently as we continue to emerge from the pandemic and recommence audit activity and refocus on our debt book,” he warned.

The organisation had recently sent 30,000 awareness letters for disclosure of business tax debts and 52,000 awareness letters about the use of director penalty notices, he said.

“These programs are focused on those who have not responded to our calls and letters – and have significant tax obligations outstanding,” he said.

“We’ve seen an encouraging response to our awareness campaigns, with a significant level of payments and clients entering into payment plans.”

There have been 20,000 taxpayers who have responded to awareness letters Picture: iStock.

Those who don’t respond will be met with garnishees, recovery of director penalties, disclosure of business tax debts, and legal actions including summons, creditors petition, wind-up and insolvency action, he cautioned.

“In fact, more than 20,000 taxpayers have already responded to our awareness letters by making payments or entering into payment plans, indicatively around $4 billion or so already,” he revealed.

It comes as the ATO revealed four key areas it will target this financial year as tax season approaches.

The office will be focusing on record-keeping, work-related expenses, rental property income, deductions and capital gains – with an extra focus on those who made money from crypto, property and shares.

The ATO will also be focusing on working from home claims, with millions of Australians working remotely throughout extensive lockdowns in late 2021 and beyond.

Originally published as ATO warns of increased debt collecting with $33.5b in tax missing