One of the developments of the COVID-19 pandemic for tax professionals and tax payers alike was the transformation of the ATO from its traditional role, collecting the nations taxes, to the temporary function of distributing the largest economic stimulus in history – JobKeeper and the Cash Flow Assistance for Businesses.
The ATO decided to adopt a sympathetic and understanding approach to it’s more traditional role as a collector during this period, with less focus on its debt collection and lodgement campaigns and providing concessions in regard to payment plan terms, return lodgement deferrals and PAYG instalment variations.
With the rebounding of the Australian economy and the end of the JobKeeper stimulus measures however, the ATO is once again turning its eye towards collection and is ramping up its compliance activities. Tax payers may again be seeing the blue, orange and red letters appearing in their mail box, chasing prompt payment of tax debts or lodgement of outstanding activity statements. 4,000 ATO officers are no longer manning the JobKeeper query hotline and are instead being sent back to their traditional homes, setting up payment plans and chasing prompt payment of tax debts.
The ATO first began mailing out its collection correspondence in February 2021 and indicated to the accounting profession that it would begin levying penalties as a tool in the collection process towards the end of March 2021.
While the ATO is generally sympathetic to those tax payers who are genuinely trying to do the right thing, have been particularly impacted by the pandemic or have unique circumstances, it is important that tax payers respond to ATO correspondence in a timely and comprehensive manner.
What to do if you receive a letter from the ATO?
- Do not ignore it;
- Pay outstanding debts by the due date or make contact with the payment arrangement team prior to the due date;
- Ensure all lodgements are up to date;
- Engage a tax professional if you have any concerns.
While overdue tax debts, outstanding income tax returns and late activity statements may be a result of financial distress for a taxpayer, ignoring the problem only creates uncertainty for all parties involved, ultimately compounds the problem and can reduce the level of understanding shown by the ATO when it comes to payment arrangements or remissions of penalties and interest. Note that unpaid PAYG withholding taxes, GST and superannuation guarantee obligations can also lead to the imposition of director penalty notices. The best course of action is always to ensure that, at minimum, lodgements are up to date, so that if payment is outstanding, at the very least all parties have a clear understanding of the liability involved.
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