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The Tax Office has run out of patience with businesses that repeatedly ignore payment reminders, vowing to pursue them with aggressive enforcement measures in a new approach to debt collection.

Issuing a warning to tax agents on Wednesday, the ATO said business clients that refused to engage or company directors with multiple debts needed to “act now” or face swift penalties.

“We're changing our approach to collecting unpaid tax and super,” the ATO said.

“We are now focusing on businesses who refuse to engage with us and continue to ignore our SMS and letter reminders.”

“This approach may impact some of your business clients who have not responded to our past engagement attempts.”

For those that failed to engage or set up payment plans for unpaid GST, pay-as-you-go (PAYG) withholding or employee super, the ATO would rapidly escalate to director penalty notices (DPNs) and garnishee orders regardless of a business’s size.

Directors of multiple companies who allowed tax and super to go unpaid and likewise failed to engage with the ATO “can expect us to look at their debts more holistically”.

“These directors can expect to receive DPNs capturing the total value of these amounts across all related entities,” the ATO said.

“If these directors don’t take action, we can recover these amounts directly from them, putting their assets at risk.”

The step-up in enforcement action comes at a time when DPNs are at historically high levels, with 26,702 notices worth $4.4 billion issued last year.

It is a 50 per cent jump from the 2022–23 income year which saw 17,459 DPNs issued for $2.87 billion in debts.

Experts have told Accountants Daily that DPNs have become increasingly common as the ATO pursues its book of collectable debt, which ballooned from $26.4 billion in 2019 to over $50 billion after the COVID-19 pandemic.

The ATO said its new focus on unresponsive taxpayers was a “deliberate and targeted approach” to level the playing field for businesses that did the right thing.

“As we change our approach to collecting unpaid tax and super, we’re making it fairer for compliant businesses that do the right thing and fulfil their tax obligations,” it said.

“Not paying tax affects everyone, and it’s important we take action to help prevent businesses from putting other small businesses and employees at risk.”

It urged practitioners to assist it in its recovery efforts, encouraging clients to pay on time or set up payment plans before enforcement actions began.

“The key message we would like to ask you to pass onto your clients is, if they can pay, please do and if they need more time to pay, don’t ignore it – act now to check if you can put in place a payment plan online or reach out to us early for help.”

“If your clients are experiencing genuine financial hardship, additional options are available, including deferring payment due dates, interest remissions and access to compassionate release of their super.”

Christine Chen
25 October 2024 
accountantsdaily.com.au