Insolvencies on the rise as ATO increases recovery action
Company insolvencies are approaching levels not seen since the global financial crisis after a blitz from the tax office chasing billions in unpaid debt. As part of the crackdown the ATO has targeted some individuals using director penalty notices which make them personally liable. It's causing growing distress and calls for the ATO to use more discretion in its tactics.
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00:00Small business debt helpline, Anna speaking.
00:04Calls from distressed small business owners being chased for old tax debts have hit unprecedented
00:10levels.
00:11Many people are crying.
00:12They don't know what to do.
00:14After giving people leeway during the pandemic, the ATO is taking stronger action to recoup
00:20$34 billion worth of debt it says is owed by small businesses.
00:25In some cases, the money is taken from a person's bank account or directly from their
00:29employer through what's known as a garnishy notice.
00:33It's also slapping tens of thousands of current and former company directors with director
00:38penalty notices, making them liable for unpaid tax and super, with just three weeks to pay
00:44up.
00:45If people do decide to liquidate, then they're in a situation where they've lost their business,
00:49perhaps they're putting employees out of work.
00:52Director Jarvis Archer says this stronger action has pushed the rate of insolvencies
00:56to levels not seen since the global financial crisis.
01:00He says sometimes director penalty notices don't even reach the person they're intended
01:05for.
01:06It's easy to miss a letter if it goes to an address, particularly if they no longer live
01:09at that address.
01:10Counsellors are calling for the ATO to waive debts for people who were made company directors
01:15without their knowledge.
01:16For example, their abusive ex-partner has made them a director.
01:19For the first time they find out that they're a director of this company for which they're
01:23going to be personally liable is when they receive that letter.
01:26The ATO says that in certain circumstances directors may have a valid defence that would
01:31remove their debt or reduce some of the interest charges, but it maintains that firmer action
01:37is needed so that small businesses doing the wrong thing don't get an unfair competitive
01:42advantage.
01:43Having gone from being so lenient to so quickly having a firmer approach, especially in a
01:49time when there is a cost of living crisis, I think it's too soon.
01:52For now, more businesses are expected to go under as the Tax Office continues calling
01:57in debts.