ASBFEO report finds ATO early debt recovery action excessive
29 April 2019
… garnishee notices were issued in a sizeable number of cases where tax disputes were before Administrative Appeals Tribunal (AAT).
Ombudsman Kate Carnell has called for the ATO to immediately cease debt recovery action against any small business with a dispute before the AAT.
“ATO garnishee notices must be actioned only with appropriate oversight and approval, such as the court system, before an order can be issued.
Australian Taxation Office – enforcement of debt recovery
Australian Small Business and Family Enterprise Ombudsman
29 April 2019
The ASBFEO found that ATO debt recovery action happens in a sizable number of cases which are before the AAT (at least 12%) and that such action can severely impact a business’ ability to prosecute its case and carry on its business. In particular, the use of garnishment (specifically enduring garnishee notices) can have a crippling impact on
Given the liquidator or trustee in bankruptcy is nominated by the ATO, no such orders should be sought in respect of a matter before the AAT.
… not all ATO staff on all occasions have exercised their decision making power
“proportionately and appropriately”.
The ATO does not engage with small business in the same ways that it expects small business to engage
The ATO’s submission to this report, reproduced in Appendix A, states:
“The only time we will recover debts in dispute is in exceptional circumstances where we see evidence of phoenixing, fraud, criminality, serious tax evasion and dissipation of assets or transfer of funds to defeat the collection of tax. These are very rare cases.”
***However, evidence gathered by our Office, combined with that in IGT reviews appears to contradict this.
The submissions from small businesses highlighted an inconsistent and undisciplined approach to debt collection by the ATO.
Small business must be able to seek a stay order of any ATO debt recovery action when before the AAT.
In non-taxation decisions, the AAT can generally hear applications for stay orders from parties, seeking to prevent the practical implementation of a decision being disputed. However, this does not apply to taxation decisions.
Legislative amendment is recommended.
Should garnishee action be required, there must be mandated external oversight and approval (such as through the court system) before such an order is made.
Settlement deeds creating a decision under section 42C of the AAT Act should be included as written decisions, published by the AAT, and included in the small business statistics of the ATO (including the annual report).
The ATO must offer the range of internal dispute resolution options and have small business acknowledgement before legal recovery action commences
The pilot [ATO Review] currently does not include topics such as GST, superannuation, fringe benefits tax, fraud and evasion findings and interest. The pilot should be now fully implemented and expanded to ensure all small business taxation issues are considered under the independent review.