ATO issuing 30-40 penalty notices a day – and rising

The ATO is sending out 30-40 director penalty notices every day and has begun referring taxpayers to credit agencies as it steps up debt collection post-COVID.

The DPNs follow 52,319 warning letters dispatched last month to directors of companies with outstanding debts on PAYG, the superannuation guarantee charge and GST.

The letters warned of imminent action unless the director took immediate steps to address the company’s obligations.

It has also issued 300 intent to disclose notices following 29,552 awareness letters concerning liabilities in excess of $100,000. Some of these debtors have already been referred to credit agencies Equifax and CreditorWatch.

The ATO said it expected “a number of insolvencies to occur over the coming months as the economy normalises”.

ATO deputy commissioner Vivek Chaudhary said the letters had found their mark.

“We’ve seen an encouraging response to our awareness campaigns, with a significant level of payments and taxpayers entering into payment plans. In fact, more than 20,000 taxpayers have already responded to our awareness letters by making payments or entering into payment plans,” he said.

“Both programs focus on making taxpayers aware of their obligations, the actions we may take, and provide clear pathways for taxpayers to re-engage, work with us, and avoid escalation.

“As part of this approach, we will continue to offer support to help taxpayers meet their obligations.”

The ATO said during the early period of COVID, it shifted emphasis from debt collection to helping businesses facing challenges.

“We understand that a lot of people – especially small businesses – have done it tough through COVID and may now have a tax debt,” said Mr Chaudhary.

“Our message is – don’t stick your head in the sand – even if you can’t pay the full amount owed straight away, please contact us or your registered tax professional to discuss and we will work with you to set up an appropriate payment arrangement. We cannot help taxpayers who do not engage with us.

“Where taxpayers don’t engage the ATO is taking firmer actions. These include garnishees, recovery of director penalties, Disclosure of Business Tax Debts, and legal actions including summons, creditors petition, wind-up and insolvency action.

“Our debt collection activities prioritise those taxpayers representing higher risks and refusing to engage. That is why our initial focus will be on taxpayers with higher debts before including taxpayers with all other debts. Taxpayers with Superannuation Guarantee debts may be prioritised irrespective of their debt value. This is because the Superannuation Guarantee is an entitlement that is owed to employees.”

As reported by Accountants Daily, the ATO stepped up debt collection post-COVID in March, issuing more than 52,000 warnings of imminent DPNs in early April. A DPN enables the ATO to commence recovery of the director penalty from each director of the company if the company does not actively manage their debt.

The disclosure of business tax debts measure allows the ATO to report significant tax debts (above $100,000) to credit reporting bureaus.

The ATO said the measure would provide a new level of visibility of significant tax debts for the business community that will allow them to make more informed decisions.