“Draconian crap”: ATO commissioner’s “free loan” warning challenged by SmartCompany readers

Australian tax chief Chris Jordan’s “unapologetic” focus on small businesses “treating ATO liabilities like a free loan” has sparked a strong response from the SME community, with one SmartCompany reader describing the approach as “draconian crap”.

Appearing before the Tax Institute Tax Summit in Melbourne on Wednesday morning, outgoing Australian Taxation Office commissioner Jordan said small businesses are “overrepresented” in terms of outstanding debt, owing $33 billion of $50.2 billion in collectable debt. Of that figure, $23 billion is unpaid business activity statement (BAS) debt.

The tax hangover from the COVID-19 pandemic, in which the ATO eased compliance activities against struggling businesses, is well-known.

However, Jordan said the tax office is particularly concerned about businesses choosing not to pay down their tax debts despite now enjoying profitability.

“Businesses appear to be de-prioritising payment of tax and super,” said Jordan.

“This is concerning and is out of step with what we know, which is that the vast majority of taxpayers pay on time, and it’s unfair for them that some choose not to. This needs to stop.

“We are hearing more and more from tax professionals that some businesses are rolling the dice, treating ATO liabilities like a free loan. This is not acceptable.”

Addressing an audience of tax professionals, Jordan said the ATO needed help to get the message across to small businesses.

“You can reinforce to your clients they are only the temporary custodians of GST, pay-as-you-go withholding and super guarantee – it’s not theirs,” he said.

“You know the signs when a business is struggling, on the brink of insolvency or perhaps needs to be told the time has come to exit gracefully.”

ATO interest rates undo argument: SmartCompany readers

Responding to a report on Jordan’s speech, SmartCompany readers have challenged the assertion that dawdling on ATO payments counts as a “free loan” for small businesses.

“Free loan?? The ATO interest rates are ridiculous,” one reader said.

The ATO imposes a “ridiculous amount” of interest on late payments, another agreed, compounding hardship for small businesses “already struggling to pay while continuing to keep up with BAS and ITAX payments in a struggling economy”.

The ATO has launched a Failure to Lodge penalty amnesty for some payments that originally fell due over the COVID-19 lockdown period.

But outside of that penalty amnesty, businesses that fall behind on their obligations can find themselves liable for the General Interest Charge (GIC), the compounding interest rate applied to overdue payments.

For July to September 2023, the annual GIC rate is 10.90%, imposing a significant deterrent to businesses treating their PAYG withholding as a bootleg line of credit.

Jordan’s statement was “draconian crap”, said a third reader.

“Very unfair. Alright for him to mouth off and attack small business. The truth is most are struggling to pay the crazy tax bills.”

Not all readers disagreed with the thrust of Jordan’s argument.

One outlier said profitable businesses holding on to their tax obligations are a risk to enterprises that make genuine attempts at tax compliance.

“The businesses not paying their debt are getting an unfair advantage over businesses doing the right thing,” they said.

“If your business cannot survive paying of all of its debts… Maybe you shouldn’t be in business?”

Big business imbalance, self-assessment system under scrutiny

Reflecting on his ten-year tenure in the role, Jordan highlighted the efforts of the Tax Avoidance Taskforce, which led to settlements between the ATO and multinational giants like Chevron, Rio Tinto, Google, BHP, Apple, ResMed, and Microsoft.

The 2018 settlement between BHP and the ATO — which saw the resources giant agree to pay $529 million in relation to taxes allegedly owed between 2003 and 2018 — caught the eye of one reader.

“Multinationals don’t have to pay like you or me… Fleece individuals and gut the small fish but leave fat cat corporations to drive greedflation and pump profits offshore,” they wrote.

Elsewhere, outstanding tax debts can be attributed to the self-assessment structure of the Australian tax system, another wrote.

It is the “consequence of ‘appointing’ businesses as unpaid (read free service) as tax collectors”.

The ATO should “stop treating small business like they’re here to collect your tax for free at our admin cost!” said a third commenter.

Do you have thoughts on the ATO’s compliance activities and approach to small business tax debts? If so, please feel free to reach out to news@smartcompany.com.au.