Australians owe almost $45b in unpaid tax

Australians owe almost $45 billion in unpaid taxes – and the tax office is coming to collect.

Collectable debt rose by 69 per cent to $44.8 billion in 2021/22, from $26.5 billion in 2019 before the COVID-19 pandemic hit.

Gathering that money will be the Australian Taxation Office’s top priority in 2022/23 as it builds on earlier debt recovery efforts to “manage” resistant taxpayers.

“As the economy recovers, one of our key priorities is to address the collectable debt that has accrued over the past three years,” the ATO said in its annual report.

It blamed the sharp rise in debt on disrupted economic activity due to lockdowns and cash flow impacts on small businesses and households during the pandemic.

“During the early stages of COVID-19 we deliberately shifted our focus away from firmer debt collection action … because of the pandemic,” the ATO said.

“While most payments are made on time, debts that remain unpaid and accumulate over time require firmer and stronger action.”

The ATO marked itself down on debt collection, reporting a collectable debt to net tax collections ratio of 8.5 per cent for 2021/22. This missed its goal to get the ratio below eight per cent.

“Small businesses continue to account for the majority of collectable debt and remain a key focus of our payment strategies,” it said.

Small businesses owe the ATO $29.3 billion while individuals owe a total of $4.2 billion.

The remaining $11 billion-plus is owed by private, public and international companies or groups, self-managed super funds and not-for-profits.

Of the monies owed, most is activity statement debt followed by income tax and superannuation guarantee charge liabilities.

Even so, the ATO chose not to pursue $2.8 billion worth of debt in 2021/22, writing it off as “uneconomical to pursue” or “irrecoverable at law”.

In 2021/22 the ATO collected gross tax of $648.5 billion and provided refunds of $132.9 billion.

Net tax collections totalled $515.6 billion, up 14.2 per cent from 2020/21.

Collectable debt is money not subject to objection or appeal or to some form of insolvency administration.

Kaaren Morrissey
(Australian Associated Press)