‘Traumatic’: Anger over ATO’s $15 billion tax surprise

The tax office’s approach to collecting $15 billion in tax debts has been slammed in a new report.

The Australian Taxation Office has been slammed for its approach to chasing up billions in old tax debts, in a new report.

The ATO has ramped up its debt collection to retrieve the more than $15 billion owed from 1.8 million entities, under its controversial “robotax” scheme.

In a report on Tuesday, the Commonwealth Ombudsman and Taxation Ombudsman lashed the government’s approach, outlining the importance for government agencies to be “transparent and accountable” when informing Aussies of unpaid debts.

“Being told you owe the government money can be a worrying, traumatic, confusing, frustrating and stressful experience,” the report by Commonwealth Ombudsman Iain Anderson and Tax Ombudsman Karen Payne reads.

“While the law may require agencies to take certain action, agencies are responsible for determining how they take that action in a way that minimises distress to affected and impacted people.”

The report by Commonwealth Ombudsman and Taxation Ombudsman called out the government’s approach to chasing up debts. Picture: AAP Image/Lukas Coch

The report notes one taxpayer was recently denied debt relief despite the ATO recognising he was in serious financial hardship.

“The complainant asked the Commissioner to exercise his discretion to refund the complainant’s 2023 tax refund instead of offsetting against his tax debt,” the report said.

The taxpayer, whose identity was not disclosed, was at “immediate risk of homelessness, which he had provided evidence of”.

After an investigation by the Ombudsman’s office, the ATO later reversed its decision and provided the taxpayer with a refund.

‘Past failings’

The report also urged the ATO to not “recommit past failings!” after it did not follow advice laid out in a 2009 Ombudsman report about improving communication with taxpayers over decisions to write-off or reactivate old debts.

“The ATO’s practice of not offsetting very small tax debts was found to be incorrect following an Australian National Audit Office audit in 2023,” the report read.

The ATO had sent 200,000 letters informing people they owed tax debts, ranging from a few cents to thousands of dollars.

At the time, ATO systems did not display debts which had been “written off’’, which were deemed “uneconomical to pursue”.

“People reported the letters did not explain how or when debts were incurred, causing concern and confusion about their validity,” the report stated.

“It is disappointing this occurred. Such issues may have been mitigated if the ATO had regard to the lessons previously learnt – including recommendations in the 2009 report, feedback from tax professionals and recommendations in a number of IGTO reports about undisputed tax debts and taxpayer rights to complain, review and appeal.

“Agencies should have regard to current and past observations and recommendations of oversight bodies. Don’t just recommit past failings! The community is entitled to expect agencies have a corporate memory.”

The ATO has been slammed in a new report.

In a statement on Tuesday, the ATO said it would “welcome” the report and was “committed to applying the principles outlined” within it.

“For active debts, we are fully transparent with the taxpayer, explain the debt and where it comes from, provide payment options, and continuously improve our practices,” a statement issued by the government agency said.

“Where a debt is considered uneconomical to pursue, the ATO may put it ‘on hold’. It is important taxpayers know that the ATO does not actively seek payment of debts that are on hold and taxpayers do not need to take any action.

“It’s important that taxpayers have trust in our tax system and clear communication is critical to building trust and confidence.”