Small businesses facing $33 billion black hole

Small businesses facing $33 billion black hole

Small businesses have been handed a warning by the new Australian Tax Office (ATO) commissioner over billions of dollars in mounting debts.

Rob Heferen, who’s been in the ATO’s top role for little over a month, today said small businesses were responsible for about two-thirds of the $50 billion in unpaid tax and superannuation owed – a sum of around $33 billion.

“The amount of collectable debt (which is ultimately tax and super that has gone unpaid by taxpayers) is now at over $50 billion,” he told the Council of Small Business Organisations Australia (COBOA) National Small Business Summit.

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“Sixty-five per cent of all collectable debt owed relates to small business and 74 per cent of that relates to activity statements.

“This means a significant portion of the amount going unpaid is GST collected from consumers or PAYG withholding, withheld from employees’ pay.

“We are seeing an increasing number of businesses fall behind on these types of payments, from which point it is very difficult for businesses to get back on top of their obligations and remain viable.”

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The amount of collectible debt in Australia skyrocketed from $26.5 billion in mid-2019 to more than $50 billion last year after the ATO paused what it described as its “firmer debt collection actions” to offer support to taxpayers during the uncertain economic conditions of the pandemic.

It has since shifted back to its normal debt collection approach, and some businesses have gone into administration in part due to tax debts accrued during the pandemic.

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However, Heferen said it was crucial for those debts to be pursued, in part to crack down on insolvent trading.

“It’s critical that all employers – big and small – keep on top of their obligations to their employees first and foremost, as well as their obligations to government in respect to GST, income tax, and other taxes,” he said.

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“Many (small businesses) are telling us how concerned they are about the unfair competitive advantage businesses not complying with ATO obligations are getting over those who are doing the right thing.

“There’s also a significant risk of businesses trading whilst insolvent and creating a situation where all creditors – including suppliers and employees miss out on what they are owed.”

There are around 6.7 million small businesses in Australia, making them what Heferen described as a “critical” part of the nation’s tax system.

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