ATO, government agencies urged to keep “people at the centre” when discussing debts

The Inspector-General of Taxation Karen Payne has urged the Australian Taxation Office (ATO) and other government agencies to keep “people at the centre” of their practices, following the so-called ‘robotax’ scheme that saw hundreds of thousands of small businesses and individuals sent letters about small, and sometimes years old, ‘on hold’ tax debts.

Speaking to SmartCompany after the release of a new set of guidelines for communicating with Australians who owe money to the government, Payne said “clear communication” is at the heart of the matter.

“Confused or unclear communication actually contributes to people’s stress,” she says. 

The guidelines, released by Payne and Commonwealth Ombudsman Iain Anderson on Tuesday, were developed in direct response to letters unexpectedly sent by the ATO in late 2023, which notified some 200,000 taxpayers and accountants that debts considered ‘on hold’ were liable for collection.

The ATO had not pursued these ‘on hold’ debts in recent years, in part due to the leniency it adopted during the Covid-19 pandemic, however, the amounts technically remained payable, either through tax returns or credits accrued by the taxpayer.

At the time, accountants told SmartCompany some of these debts were for as little as 31 cents. Others were for thousands of dollars and many were incurred years ago, but together reportedly totalled more than $15 billion.

The recovery activity was likened by some to the fraught robo-debt scheme, and resulted in the ATO pausing the letters in November 2023.

The ATO welcomed the new guidelines on Tuesday and re-affirmed its commitment to improving its communication with taxpayers about debts.

According to a case study published on the Inspector-General’s website, one of the letters issued by the ATO related to a director penalty notice for a director of a company that is no longer trading. The director involved believed the penalty levelled by the ATO was “excessive” and with the help of the Inspector-General’s office, was eventually able to have the debt waived by the Department of Finance with the ATO supporting the application for this to be done.

The case shows that “at the end of this tunnel this was some light and a resolution” for this business owner, says Payne.

“Even though the tax office does not have the ability to waive debts themselves, in circumstances where they acknowledge they have contributed to the problem, they are able to support applications for a debt waiver,” Payne explains.

“It’s not the case they can do nothing; they can do something.”

Payne says government agencies must keep “people at the centre” of their administration.

“That requires, if you are communicating with people, well have a think about how they are going to be impacted by the message you are communicating, and have you given them the information they need?” she says.

“Have you given them options? Have you given them directions on where they can go and get more information? All of those pieces of the communication puzzle are important.”