ATO biggest small business lender?
(3 November 2018 - Australia) Debt owed to the Australian Taxation Office (ATO) by small businesses is larger than ever, with collectible small business tax debt surpassing A$10 billion of the total A$24 billion in total tax debt owed subject to objection or appeal.
Collectible debt has now reached A$23.7 billion, up from A$20.9 billion in 2016-17 and predominantly owed by small business. The ATO has conceded that A$1.1 billion is not pursuable and A$3.7 billion is ‘irrecoverable at law’. East & Partners previously conducted segmentation analysis on the level of ATO debt payable by small businesses in 2013, revealing a fascinating insight into the outstanding liability that still remains and in fact has grown since then. Deferral of tax payments by small businesses has the potential to put the businesses in technical breach of loan conditions, something many Micro businesses and SMEs would arguably be unaware of.
The annual report also confirms the agency collected more company tax from more middle market corporates with larger profits, exceeding the ATO’s revenue target. Net tax collections hit A$397 billion in 2017-18, up ten percent year-on-year. And $12.5 billion above budget. The ATO's main group targeting conglomerates and multinationals, the Tax Avoidance Taskforce, raised A$2.8 billion in liabilities with more than A$1.3 billion from multinationals and public groups. But the ATO has in some cases opted to settle with some large companies that dispute tax bills, rather than fight it out in court.
In the public group and multinational business line the ATO settled with 96 companies in 2017-18. It had originally approached these enterprises with A$2.8 billion worth of tax bills yet collected A$2.1 billion. The ATO’s total legal expenditure for 2017-18 increased by two percent when compared to the previous year, with more taxpayers requesting the ATO fund cases in insolvency matters that impact a range of creditors including employees.