Resumption of ATO debt collection of aged tax debts
Taxpayers with aged debts that the ATO had paused collecting or put on hold should be aware that offsetting aged debts against tax refunds or credits has now resumed. Letters were sent out in May 2022 to remind taxpayers that they have aged debts and that June 2022 will see the recommencement of debt collection. The aged debts can be offset either from ATO accounts or credits from other government agencies, although the debt will not be offset if the only available credit relates to a Family Tax Benefit amount.
Resumption of aged debt collection activity
The ATO has recently announced that it will resume collecting aged debts by offsetting tax refunds or credits. Aged debts are a collective term the ATO uses to refer to its uneconomical to pursue debts that it has placed on hold and has not taken any recent recovery action to collect. These debts do not typically show up on the online accounts of the taxpayers as an outstanding balance as the ATO has made them “inactive”.
ATO aged debt letters
Usually when a debt is put on hold, the ATO notifies the taxpayer via a letter that debt collection has been paused and that any credits that the taxpayer is entitled to will be offset against the debt. In addition, the ATO will also note that it reserves the right to re-raise the debt in the future, depending on the circumstances of the taxpayer. Letters were sent out in May 2022 to remind taxpayers that they have aged debts and June 2022 will see the recommencement of debt collection activity.
While most taxpayers should have received their aged debts letter by now, some may not have received anything, due to a change of address or irregularities in the postal service. The first clue for those taxpayers that they may have an aged debt may be when they notice that their refund is less than expected or a credit on one account is less than it should be. To avoid surprises, taxpayers who are unsure whether they have aged debt can check their online services for a transaction with the description “non-pursuit” on their statement of account. It is important to remember that those with multiple accounts need to check all relevant accounts for that description to ensure they do not have an aged debt.
ATO offsetting aged debts
Taxpayers with aged debts who are unable to pay or choose not to pay all or part of the debt may find they end up paying more, as general interest charge may be automatically applied even though the debt is “on hold”. Where the ATO offsets aged debts either against ATO accounts or credits from other government agencies, taxpayers will be notified that the debt has been re-raised and offset. If it is offset against an ATO account, taxpayers will be able to find a transaction on online services with the description “offset”.
By law, the ATO is required to offset credits against any tax debts owed except in some very limited circumstances, such as:
- having a fully compliant payment plan for outstanding debts
- the tax debt is a future debt
- the tax debt relates to a director penalty liability
- a deferral of recovery action has been granted
- the available credit is a Family Tax Benefit amount
Waiver or release
Taxpayers that do not meet the above criteria and are unable to pay the debt may be able to apply for a review, waiver or release depending on their circumstances.
For example, a permanent release of a tax debt may be available on the basis of serious hardship (i.e. where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education).
The ATO has recently updated its guidance on debt relief, waiver and non-pursuit of debt. We discuss the updated guidance in another article which can be found here.
Need help?
Not sure whether you have an aged debt with the ATO? We can help you find out and work with the ATO on your behalf to find the most optimal solution to either repay the debt or apply for a waiver if your circumstances satisfy the serious hardship tests. It’s important to take prompt action as interest charges will continue to accrue.
For expert advice and assistance in dealing with your Tax Debt in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.