Over the past year, the Australian Taxation Office (ATO) has made it clear that prior leniency is well and truly over. With billions in collectable debt on its books - most of it owed by small businesses - the ATO are enforcing.
For accountants and their clients, this means greater risks if tax debts are allowed to accumulate. Below we outline the key changes, risks, and practical steps to help stay ahead.
The Current Landscape
- Stronger enforcement: The ATO is taking a harder line with directors personally through DPNs, as well as garnishee notices that can cut off cash flow overnight.
- Reduced flexibility: Businesses can no longer rely on easy repayment plans. The ATO now expects meaningful commitments backed by evidence.
- Old debts revived: Debts placed “on hold” in earlier years are being actively applied against refunds or collected.
- Legislative changes: With interest no longer deductible from 1 July 2025, carrying ATO debt will hit harder on the bottom line.
What Accountants Should Be Doing
- Monitor closely – Review aged liabilities, including PAYG, GST, and super guarantee. Small debts compound quickly.
- Prioritise tax debt in cash flow – Build ATO repayments into cash flow forecasts.
- Engage early – Clients should respond to ATO correspondence promptly. Proactive engagement can prevent harsher enforcement.
- Be realistic with payment plans – Don’t over-promise. Provide credible financial data to support sustainable repayment terms.
- Educate clients on enforcement tools – Many directors underestimate the risk of DPNs and garnishees until it’s too late.
- Keep records current – Ensure ASIC and registry addresses are up to date to avoid missed notices and maintain records to support hardship claims.
- Plan for tax deductibility changes – Prepare clients for the fact that from July 2025, GIC and SIC are no longer deductible.
- Assess solvency regularly – If tax debt is becoming unmanageable, consider whether restructuring or insolvency advice is needed.
The bottom line
The ATO’s tougher stance is here to stay. For accountants, you need to lead the way: by identifying issues early, keeping clients informed, and steering them towards sustainable strategies before the ATO forces their hand.
