Australian small business tax debt is growing.
According to the Australian National Audit Office (ANAO), Small business tax debt in 2017-18 was A$19.7 billion. Currently it is likely well over that figure.
The ANAO’s recent report makes for interesting reading. It outlines the changes the ATO is making to debt management. The three main changes you need to know are.
First, if you have a tax debt relating to a Business Activity Statement where there was previously a nil or credit balance, then you may have experienced Purposeful First Action (PFA).
PFA is a system that assesses you as you enter into debt and assigns you to one of six “treatment pathways” based on your compliance history and past behaviour. The time taken to get to stronger action depends on the allocated pathway and can vary from 149 to 579 days. Pathway one is for taxpayers who receive a low risk rating and pathway six is for those with the highest risk rating, which may mean the taxpayer often lodges and pays late with many outstanding lodgements.
The latest iteration consolidated the number of pathways and inserted additional steps requiring the ATO to issue warning letters and have, or attempt to have, at least two telephone discussions with the you. The ATO says it is trying harder to contact the taxpayers before taking firmer and stronger action.
The ATO plans to intensify PFA by the end of the year, replacing the current “Debt right now!” pathway, which produces bottlenecks. Taxpayers may find they are being moved more quickly to firmer and stronger action.
Second, The Next Best Action (NBA), which aims to scan and analyse the entire debt population to determine the best next action by looking for trigger events such as escalating debt or defaulted payment plans that may indicate that a different pathway is required for a particular taxpayer. The same approach is used in countries such as Singapore, Sweden, Finland, Belgium and Ireland currently at the prototype stage.
Third, the ATO’s corporate plan 2018-19 has ‘Payment Thinking’ as a strategic initiative to make payment an easy and natural part of activities across all stages of tax and superannuation. Payment Thinking allows taxpayers to see their tax position at all times and makes it easier to make online payments, especially voluntary ones.