BCashflow Positive / Blog

Cracking Down on Unpaid Tax: ATO’s Vigorous Pursuit

Aug 25 2023

In the first seven months of 2023, The Australian Taxation Office (ATO) initiated 476 wind-up proceedings against small businesses, compared with just 14 in the same period last year.  This aggressive approach is being undertaken by the ATO to recover $30 billion in overdue small business tax.

The tougher approach comes after a period of leniency that has seen an overdue balance which nearly doubled during the pandemic.

This approach coincides with the prolonged contraction in retail spending, now dubbed “the most protracted since the global financial crisis”, coming on the heels of 12 interest rate hikes in 15 months by the Reserve Bank.


Dual Strategy for Recovery: ATO’s Decisive Measures

The ATO has adopted a dual strategy with a spokesperson recently saying;

“The ATO is taking decisive and swift action with those clients choosing not to engage and who purposefully avoid their payment obligations”. Simultaneously, “We will continue to offer help and assistance to those who genuinely need it”.

“The focal point this year centres on recuperating high-value and aged debts and requiring timely payment of employer obligations, including unpaid superannuation.”

“The decision to commence winding up proceedings is not taken lightly and only after the company has been afforded ample opportunity to re-engage and address its debts.”

It’s noteworthy that despite the increased court actions, the numbers still fall below those recorded in the pre-pandemic period. For context, the ATO lodged 950 wind-up cases in the initial seven months of 2019.


Expert Insight: ATO’s Enforcer Role Under the Spotlight

KordaMentha partner Craig Shepard offers an informed viewpoint on the situation. He observes that the ATO’s current vigorous enforcement aligns with its historical role as a major enforcer and court user. He allays concerns about the alarming surge in actions, pointing out that many of the affected companies have already ceased trading, and the ATO is primarily concluding unfinished cases.


Balancing the Scales: Tax Debt Dynamics

A telling indicator of the current financial landscape is the trajectory of small business collectible tax debt. This figure has skyrocketed from $16.5 billion at the close of the 2019 financial year to a staggering $29.3 billion by June 2022. In addition to this sum, $1.1 billion is disputed, and $4.9 billion is owed by insolvent companies.


The Numbers:

 Considering the broader picture, the overall collectible tax debt now stands at an imposing “$44.8 billion.” This represents a notable increase of “$18.3 billion, or 69 per cent,” since 30 June 2019. In its recently unveiled 2023-24 corporate plan, the ATO places a clear emphasis on debt collection, signifying a strategic pivot from the leniency observed during the pandemic.

Interestingly, small businesses grapple with a substantial tax gap, quantified at “11.6 per cent, or about $11.9 billion.” In sharp contrast, large corporations contend with a markedly lower tax gap of “4.2 percent, or $2.6 billion.” This disparity underscores the distinct challenges faced by small enterprises in maintaining full tax compliance.


Proactive Engagement: A Path Forward for Struggling Businesses

Amid the evolving landscape, businesses facing financial constraints are advised to proactively engage with the ATO. The importance of pre-emptive action, suggesting that businesses that take the initiative to establish equitable arrangements stand a better chance of avoiding court proceedings.


Partnering for Stability and Growth: BCashflow Positive Steps in with Invoice Factoring

As businesses strive to manoeuvre within this complex landscape, BCashflow Positive is here as a steadfast ally, employing innovative options like invoice factoring.  BCashflow Positive offer tailored solutions that bridge financial gaps, by transforming outstanding invoices into working capital through invoice factoring.  BCashflow Positive empowers businesses to tackle financial challenges head on, ensuring stability and growth in an ever-changing economic environment.

So, if you are seeking strategies to navigate the uncertainties of today’s business environment, reach out to BCashflow Positive today on 1300 884 100 to see how we can assist in securing your business’s future.

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