The opportunity to submit views on draft legislation that would give the Administrative Appeals Tribunal (AAT) powers to pause or modify debt recovery actions by the Commissioner of Taxation on small businesses has come to an end. This refers to businesses with a total annual turnover of less than $10 million.
Stakeholders were given just the week of January 12 to January 19, 2022, to make submissions on proposed legislation that would allow small businesses to contest disputed tax debts alleged by the Australian Tax Office (ATO).
These new powers that are to be granted to the AAT are part of proposals made by the government during its 2021-2022 Budget. They would enable the AAT to prevent the ATO from pursuing debt recovery actions while tax assessments were still being disputed. These would include stopping such actions as garnishment notices and undertaking winding up proceedings until the disputes have been resolved.
Furthermore, the AAT would be empowered to direct the ATO to offer instalment arrangements for the payment of debts. This would include 50/50 payment arrangements and acceptance of collateral in place of immediate recovery to debts.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) office has welcomed the draft legislation. According to the ASBFEO spokesperson, the draft proposals reflected their recommendation to the government that the ATO be prevented from applying penalties and interest on debts while the cases were still in dispute. This move would allow small business taxpayers to pursue all avenues of appeal without interference.
The Institute of Public Accountants GM of technical policy, Tony Greco, has also voiced support for the proposed changes, noting that it will provide additional security for small businesses by allowing them to make applications to the AAT for debt recovery actions to be paused or modified while cases were still in dispute. He commended the proposals as being a good feature of the tax system that would help address the power imbalance between the tax office and small businesses.
Greco said that debt recovery actions could be harsh on a small business and that premature action made little sense when the ATO could more cost-effectively and fairly wait till disputes had been resolved. He added that the changes would allow business owners to keep running their establishments while the dispute was being handled before the AAT. He also highlighted that the changes would help bring Australia’s tax system more in line with those of the US and UK by increasing the rights of small businesses when contesting the collection of disputed tax debts.
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