The Australian Tax Office (ATO) has informed tax professionals that their clients will begin receiving notification letters on any outstanding aged debt beginning May 2022. Aged debt, or debts on hold, are uneconomic non-pursued debts that are not visible on the balance of taxpayers’ accounts as they have been classified as inactive. These debts have been put on hold as pursuing recovery has proven uneconomical for the ATO, but may still be re-raised at a later date when the taxpayer becomes entitled to credits or their circumstance changes.
Beginning June this year, the tax authority will offset the said taxpayers’ credits or tax refunds against these debts. Such action could result in taxpayers and their agents finding that their refund amounts are less than what was expected. This offset may be done using tax refunds or credits related to the same account or from another account also belonging to the same taxpayer. The ATO could also offset credits the client is entitled to receive from additional government sources to pay the aged debts.
While the ATO is empowered to undertake such recoveries, the law does outline exceptions including if there is already a payment plan in place for settling outstanding debts that the taxpayer has been abiding by, if the taxpayer was granted a deferral of recovery action, if the debt has a future due date, and if the debt relates to a director penalty liability. If the credit to be offset is a family tax benefit amount, an exception may also be granted.
Taxpayers owing debts on hold will be informed of the due date by when they are expected to settle any outstanding amount in the notification letters. If the individuals are not able to meet this obligation within that time frame, they are advised to get in touch with the ATO to arrange for a payment plan.
ATO Deputy Commissioner, Vivek Chaudhary, is urging taxpayers to collaborate with the ATO to rectify their situation through engagement instead of compelling enforcement as the economy emerges from the pandemic. He said that the tax body offered various assistance and support arrangements that could be tailored to each taxpayer’s unique situation. He added that it was only when taxpayers failed to engage with the ATO that firmer actions were being taken.
The offset transactions can be viewed through Online Services for Agents, with taxpayers being notified on their Statement of Account (SOA). The statement can also be viewed through the Online Services for Agents, under the Communication History.
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