Home Disputes & Litigation Increased ATO debt recovery action likely to lead to credit tightening and increase recovery action for SMEs

Increased ATO debt recovery action likely to lead to credit tightening and increase recovery action for SMEs

Recently, liquidators we have dealings with, are reporting an increase in enquiries relating to new collection activity from the ATO as it seeks to address the $1.3 billion shortfall against its compliance revenue target.

Tax Debts

Tax debts have been steadily accruing for many businesses as a result of the COVID-19 pandemic.

When COVID-19 hit, recovery action by the ATO was suspended. Additionally, businesses indebtedness to the ATO increased as a result of ongoing accruals and new payment arrangements.

At the same time, debt collection by businesses generally was stifled as a result of a moratorium on liquidations and bankruptcies and increases in thresholds for commencing winding up and bankruptcy proceedings. As a result of this, and a general perception of insolvency or potential insolvency of small businesses in 2020, many businesses put all debt recovery action on hold pending the outcome of the COVID-19 pandemic.

ATO Debt Recovery

From the end of March 2021, where appropriate, the imposition of penalties will resume and on a case-by-case basis, we will start taking debt and lodgement compliance actions.

an ATO spokesperson told Accountants Daily.

Get Ahead of the Game

In anticipation of this credit crunch and increase recovery action we recommend that businesses take steps now to get a head of the game. In particular, businesses should:

Ensure that they have up to date financial statements and have reviewed their debtors ledgers,
Refer all debts that are between 60 and 90 days to our Debt Recovery Team for recovery. We will identify and assess any dispute and recover the debt quickly. Find out more here, and
Review the standard form contracts, Credit Applications and Credit Management Procedures. Strategic improvements in these contracts and procedures give greater certainty of payment and the ability to limit credit when necessary.

The unfortunate reality is that the older a debt gets the more likely it is that the debt will never be recovered or recovered in full.

How Can We Help

If any of the above issues are impacting your business contact us for a Free Case Evaluation or call 1300 553 343.

Business Lawyers for Sydney and Newcastle

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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.