Tax office restarts chasing small business debts after a ‘pause’ during lockdowns

Accounting groups are urging small businesses to lodge overdue tax returns, after the tax office revealed it has started collecting debts in New South Wales, Victoria and the ACT.

The Australian Institute of Public Accountants and CPA Australia are encouraging small businesses to engage with the tax office and set up payment plans if they have outstanding tax debts.

Tony Greco, general manager of technical policy at the Australian Institute of Public Accountants, says the tax office is allowing businesses in difficult situations enter into payment plans, helping them avoid penalties.

“The easiest thing businesses can do is to lodge and then organise a payment plan that suits their circumstances,” Greco tells SmartCompany.

The tax office recently began chasing tax debts in NSW, Victoria and the ACT following the easing of COVID-19 restrictions.

In a statement provided to SmartCompany, a spokesperson from the Australian Taxation Office (ATO) said enforcement efforts have resumed “after a general pause during the lockdowns”.

“Our initial focus will be on taxpayers with higher debts before including taxpayers with all other debts in the new calendar year,” the spokesperson said.

“Taxpayers with Superannuation Guarantee debts may be prioritised irrespective of their debt value.”

The ATO confirmed it is taking “a tailored approach” to lodgement and payment enforcement, understanding some sectors have been hit harder than others as a result of COVID-19 restrictions.

“We acknowledge that the small business sector was one of the hardest hit through COVID-19,” the spokesperson said.

“Small businesses are a diverse group, and we will continue to provide tailored support to assist small businesses and their tax professionals through these challenges.”

Elinor Kasapidis, senior manager of tax policy at CPA Australia, says businesses should be careful not to fall behind on paying taxes on superannuation payments.

“If you’re not making payments at the right time to the superannuation funds, then you have to lodge your Superannuation Guarantee Charge Statement with the ATO,” Kasapidis tells SmartCompany.

“And there are admin interest and penalty costs associated with that,” she adds.

The ATO paused the vast majority of its debt collection activities when tough COVID-19 restrictions were in place, contributing to the record $55 billion in tax owed to the office in June this year.

Kasapidis says businesses who are aware of their tax debts should seek out advice, particularly if they are struggling with cash flow.

“An accountant or tax agent can help businesses work through how to manage their finances,” she says.