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GST, PAYG withholding a ‘significant portion’ of $50bn tax debt

Small businesses are increasingly falling behind on debts, with two-thirds of all debt owed by small business, the ATO warns.


In a recent address, ATO Tax Commissioner Rob Heferen stressed the importance of small business owners meeting their obligations, with small business debts to the ATO continuing to climb. 

The Tax Office is currently chasing over $50 billion in collectable debt, with 65 per cent of all collectable debt owed relating to small business, said Heferen, speaking at the Council of Small Business Organisations Australia (COSBOA) summit.

Of the collectable debt owed by small business, around three-quarters or 74 per cent relates to activity statements.


"This means a significant portion of the amount going unpaid is GST collected from consumers or PAYG withholding, withheld from employees pay," said Heferen.

"We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable."

The freshly minted commissioner told the COSBOA summit that ensuring taxpayers pay their tax and super obligations will remain a key focus for the ATO.


In September of last year, deputy commissioner Vivek Chaudhary said the ATO’s collectable business debt had nearly doubled over the last four years. In June 2019, taxpayers owed $26.5 billion while, at the time of his speaking, the debt had climbed to $50.2 billion.

These amounts only reflect debt owed by businesses, though they make up 90 per cent of all collectable debt. Chaudhary called the growth “concerning” and “unsustainable.”


“Too many businesses have accumulated unsustainable levels of debt. We want to guard against our payment culture turning from consistently paying on time to paying late,” he said.

Chaudhary said late payment creates an unlevel business playing field, and this idea was echoed in Heferen’s Thursday address.

“Many of your members are telling us how concerned they are about the unfair competitive advantage businesses not complying with ATO obligations are getting over those who are doing the right thing,” said Heferen.

“There’s also a significant risk of businesses trading whilst insolvent and creating a situation where all creditors – including suppliers and employees miss out on what they are owed.”

Lessons from debts on hold

Heferen also told conference attendees that the ATO last year learned the “very hard lesson” that its ability to waive taxpayer debt was very narrow.

Though he did not go into details, Heferen was likely referring to the Australian National Audit Office’s disapproving review of the agency’s approach to debts on hold.

Where recovery of a debt does not make economic sense, typically because it is for an insignificant amount, the ATO will often put the debt collection on hold.

The ATO began advising taxpayers that it would be offsetting the debts against returns or credits last year after the ANAO raised concerns with the ATO's previous practices for the debts following the end of the pandemic.

The awareness campaign was later paused following concerns raised by the community.

The Taxation Ombudsman this week called for the ATO to wipe interest from the approximately $15 billion the ATO said it was actively looking to claw back with these debts.

On Tuesday afternoon, Karen Payne told ABC Drive the ATO was right to collect the debts, but that it should “have regard to the circumstances in which the debt … has been raised and communicated to taxpayers.”

“If the debt is very old and you haven’t been advising taxpayers that it exists, then it would seem fair to me that any interest component should be remitted,” added Payne.




Nick Wilson
05 April 2024

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