Amidst a slowing economy, small businesses in Australia are facing increasing pressure from the Australian Taxation Office to settle debts amounting to over $34 billion.
The ATO’s aggressive debt recovery tactics have raised concerns, with experts warning that the rate of insolvencies may soon reach levels not seen since the aftermath of the global financial crisis.
Sectors already grappling with economic challenges, such as construction, hospitality, and retail, are bearing the brunt of these actions.
While the ATO is not the primary initiator of winding-up applications in court, its intensified debt recovery measures, coupled with a deteriorating economy, are exacerbating the situation for struggling businesses.
The total collectible debt, as reported by the ATO, has surged to $52.4 billion by the end of December 2023, with small businesses accounting for a significant portion of this amount.
Old debts
The ATO has intensified its efforts to recover old tax debts, further straining individuals’ financial stability.
Jarvis Archer, Head of Business Restructuring at Revive Financial, noted a marked increase in company insolvencies in recent months, surpassing both pre-COVID and post-GFC levels.
He attributed this trend to the combination of aggressive ATO debt recovery actions and a slowing economy.
Archer highlighted the ATO’s utilization of various debt recovery tools, including director penalty notices and garnishee notices, to compel compliance.
The practice of issuing garnishee notices has attracted criticism for its adverse impact on small businesses, as documented in recent investigations and reviews.
Business insolvency
Independent MP Andrew Wilkie voiced concerns over the ATO’s approach, warning that it could drive more small businesses into insolvency. He emphasized the need for a more balanced and sensible debt recovery strategy.
Wonder how many suicides the ATO has factored in to its latest debt recovery scheme being written about in the media today?
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