Watch out! Tax office bombs are about to drop

A tax “bomb shelter”? Inspector-General of Taxation Karen Payne. Picture: Stuart McEvoy.

The Australian Taxation Office is set to drop the equivalent of an “atom bomb” on a large number of Australian taxpayers – often linked to small and medium-sized enterprises.

Once the ATO presses “the bomb release button” on a taxpayer, for the next five to 10 years that taxpayer will not be able to gain a loan from a bank or most finance providers; obtain a credit card; run a business; buy a house (unless they can pay in cash) and even rent a dwelling.

Below I will explain how taxpayers will receive written advance warning that the bomb is about to be dropped on them and what they can do to prevent, or at least delay, being wiped out.

The “bomb” is the recently-legislated right of the ATO to inform the privately-owned credit bureaus of the fact that a person and/or enterprise owed taxation. The current Coalition government was convinced by the ATO to give it that power but implementation was delayed in the JobKeeper era. However now, the bombs are being loaded.

We know the devastation caused by this ATO bomb because an early version of it was used to help destroy Australia’s gold refining industry and some of our best researchers, so setting Australian research back a decade.

The ATO demanded our researchers return their government grants years after they had spent the money, and added fines and interest. While the ATO did not inform the credit bureaus of their research destruction plan, somehow, some way, the credit bureaus indirectly got the “whisper” and acted.

Seven years later former brilliant researchers still can’t operate a business or buy a house and when they rent a house they have to cross every finger that the landlord will not check their credit rating.

Some researchers have been compensated by the ATO for its appalling and illegal actions.

In the case of the gold refiners the ATO actions were declared illegal by the Federal and High Courts but in both cases the five to 10-year bomb fallout - credit bans - remains.

Given the ATO’s performance in the so-called Robodebt payments, where social services were linked to false annual income information on the ATO database, causing people to be robbed of social service entitlements, it’s surprising the government gave the ATO control of “the bomb release button”.

A “huge power imbalance”. The Australian Taxation Office. Picture: AAP

I emphasise that there should be no sympathy for people who are genuinely avoiding taxation and if they are hit hard then so be it. It’s true that in recent times some of the ATO fiefdoms previously intent on destruction have been hauled in, but once the heat is off they will resume their unfair destructive paths.

The ATO should not have been handed that destructive power given the chaotic and unfair state of Australian tax law. And for the government to allow the ATO to start dropping the bombs in the middle of the Covid lockdowns on the east coast is close to inexcusable.

Australia has no taxpayer bill of rights and the ATO does not believe in the English system of justice.

Accordingly the ATO, often dubiously, sets the tax bill then adds interest and penalties and the taxpayer must try to prove otherwise. There are rudimentary appeal systems but often they don’t work, leaving the Federal Court as the only reliable appeal avenue but its costs are beyond the reach of most taxpayers.

The taxpayer is at the mercy of the ATO with a huge power imbalance. The ATO should not be allowed to give taxpayer names to credit bureaus until this system is fixed.

At the very least, given the severe Covid lockdowns, the legislation should be again delayed. But the government will need to be quick because the bombs are about to be dropped.

Taxpayers will know they are about to be bombed when they receive a letter headed with words like: “Act now or your tax debt will be reported to credit reporting bureaus”.

In many cases the letters will not be received by the taxpayer because of incorrect mail or email addresses.

The government inserted two caveats in the legislation and one may prove an effective but crazy bomb shelter.

The first is that provided there are negotiations still taking place the bomb cannot be dropped on the taxpayer. Start negotiating.

The second shelter may work even better. The taxpayer can report the matter to the Inspector-General of Taxation, Karen Payne.

With the bombs about to drop Payne has put a huge orange banner on the Inspector-General of Taxation website which taxpayers receiving a letter can click on and begin creating a temporary shelter.

The Inspector-General has no power to resolve a dispute but can look at the process the ATO has undertaken. And once that process is completed there is nothing in the act to prevent another click, and another….. and that can go on until the government fixes the unfair and chaotic tax act.

Meanwhile the words of the Inspector-General on the web site are the best advice available:

“We strongly encourage you to lodge your complaint online as this is in writing and the quickest way to raise your concerns with us and for us to prioritise your complaint.

“By using our online complaint web form, you will be able to advise us that your complaint relates to the ATO’s intention to report your tax debt information to credit reporting bureaus.

“You will also be able to attach the orange-coloured letter you received from the ATO along with any other documents you wish to provide us. We will then prioritise your complaint as demonstrating urgent circumstances” Thank you. Karen Payne.