The Australian Taxation Office (ATO) has escalated its recovery efforts, pursuing more than AUD $50 billion in unpaid tax debts, largely accrued during the pandemic. Small businesses, which account for nearly two-thirds of the debt, are now facing intensified enforcement measures.
This shift comes after a prolonged period of leniency aimed at helping businesses weather economic uncertainty. With insolvencies still at elevated levels and operational costs continuing to rise, the ATO’s renewed focus on compliance marks a significant policy turn.
Small Businesses Bear the Brunt of Recovery Efforts
The ATO has clarified that its current actions are driven by the need to reduce a record-high level of collectable debt. According to a spokesperson, « we are committed to collecting this using all the tools at our disposal ». That includes penalties, garnishee notices, and director liability enforcement.
Businesses earning under AUD $20 million annually are required to submit Business Activity Statements (BAS) quarterly. Failure to meet this obligation may result in a Failure To Lodge (FTL) penalty, beginning at AUD $330 and potentially escalating to AUD $1,650 for repeated non-compliance. Medium-sized businesses face fines starting at AUD $660, rising up to AUD $3,300. The ATO has also introduced a policy from April requiring some non-compliant businesses to switch from quarterly to monthly BAS lodgements.
Further measures include the issuance of Director Penalty Notices (DPNs), which hold company directors personally liable for unpaid obligations such as PAYG withholding, GST, and super guarantee charges. According to 2GB Radio host Ben Fordham, accountants report a sharp rise in the use of these notices, signalling a more assertive enforcement approach.
Garnishee Notices and Legal Actions on the Rise
One of the more direct enforcement methods currently being deployed is the garnishee notice. This allows the ATO to recover funds directly from a taxpayer’s bank account, tax refunds, or even from third parties such as employers, financial institutions, or real estate agents. As outlined by Yahoo Finance, this tactic is increasingly being used to secure outstanding payments without prior warning.
Although the ATO maintains that these measures are targeted at the most non-compliant taxpayers—stating, “1 per cent of taxpayers are responsible for 20 per cent of the debt » —the fallout for small businesses could be substantial. Despite acknowledging the ongoing challenges faced by some sectors, the agency has reaffirmed its commitment to maintaining « fairness and confidence in the system.”
Taxpayers facing financial hardship are encouraged to engage early, with options such as payment plans and interest charge reductions potentially available. The ATO has also announced the development of a new “vulnerability capability” to better identify and support at-risk individuals and entities.
