ATO needs to focus on collecting older, larger | Australian Markets

One per cent of taxpayers owe 20% of the Australian Taxation Office’s (ATO’s) collectable debt and the tax workplace needs to be focusing on previous, excellent debtors moderately than small companies struggling to make ends meet.

That is the underside line of a pre-election briefing doc the most important accounting teams despatched to cross-benchers within the Senate in what represented a bid to have the Treasury Laws Amendment (Tax Incentives and Integrity) Bill across the deductibility of the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC) deferred.

The cross-bench was advised the proposal to completely deny deductions for GIC and SIC represents a punitive measure that dangers exacerbating financial hardship for small companies already going through challenges resembling high inflation, elevated rates of interest, and money stream constraints.

“By making these interest costs on tax debts non-deductible, the proposal risks accelerating the accumulation of tax liabilities of small businesses to unsustainable levels, potentially threatening the viability of many small businesses,” it mentioned.

GIC is at the moment 11.38%, an quantity that’s considerably larger than industrial rates of interest obtainable to many companies and people. GIC compounds shortly. A 12.5% GIC fee will end in curiosity fees being equal to roughly 28% of the unpaid tax after two years, 65% by the top of 4 years and 112% after six years. Making GIC non-deductible will solely make it more costly.

“Whilst it would be prudent for small businesses to obtain alternative finance from the private sector, in practice that is difficult to do as many financial institutions will not lend to businesses with tax debt. Thus, a business may not be able to swap tax debt for other forms of finance.”

“1% of taxpayers owe 20% of the ATO’s collectable debt. Our members usually lament that it’s taxpayers who’re a couple of days late in paying their tax invoice that usually really feel the wrath of the ATO moderately than these with giant, long excellent debt.

“During a cost-of-living crisis, when many small businesses are struggling to make ends meet, existing ATO powers to rein in debt should be targeted at large old balances. It is further noted that this measure comes at a time when our members are concerned about long delays in service delivery by the ATO,” the briefing doc mentioned..

“Making GIC and SIC non-deductible penalises taxpayers who’ve traditionally ‘done the right thing’ or, by no fault of their own, accrue these fees due to reliable tax disputes or administrative delays. The proposal doesn’t distinguish between good and unhealthy taxpayers.

“Obtaining GIC and SIC remission is difficult. Our members are consistently reporting long delays and inconsistent outcomes when they apply for GIC remission requests. Often the first response is ‘no’ and multiple phone calls to the ATO are required,” it mentioned.