The Australian Tax Office (ATO) is stepping up in a bid to recover an astounding $30 billion tax debt. The rescue boat they’re sending out? An amnesty for small businesses that haven’t lodged income tax returns, fringe benefits tax returns, or business activity statements. This amnesty spans tax obligations due from December 2019 through February 2022 and will wind up at year’s end.
Small businesses eligible for this amnesty are those with a turnover of under $10 million at the time their original lodgement was due. Tony Greco from the Institute of Public Accountants provides some insight into the ATO’s thinking – this amnesty strategy is rolled out when there’s a significant cluster of taxpayers who’ve strayed off the compliance path.
The ATO is using a “carrot and stick” approach here – it’s an invitation for businesses to come clean, with non-lodgement penalties wiped off. But businesses that ignore the offer won’t escape the ATO’s attention. Emma Tobias, ATO’s assistant commissioner, strongly urges businesses lagging behind to take this opportunity to get their tax matters in order.
The ATO defines small businesses as sole traders, companies, trusts, or partnerships running a business with an annual turnover of under $10 million. During the trying times of the COVID-19 pandemic, the ATO put its tax debt collection activities on pause, providing some respite to struggling small and medium-sized businesses, before resuming collection activities.
The staggering $30 billion collectible debt also includes roughly $1.6 billion in superannuation payments due to employees. It’s likely that a significant portion of this debt belongs to very small businesses like sole traders, who fell behind with the ATO amidst the turmoil of lockdowns, bushfires, and floods.
To take advantage of the amnesty, businesses or their tax professionals just need to lodge their outstanding tax returns or activity statements. The ATO will then automatically remit the failure-to-lodge penalty. Note, the amnesty doesn’t extend to superannuation obligations and excludes other administrative penalties.
Amnesties have been employed sparingly in the past, with the previous one zeroing in on superannuation guarantee payments. That move led 28,300 employers to come forward, clawing back over $910 million in underpayments, an illustrative example of the efficacy of amnesties in luring taxpayers back into compliance.
And a friendly reminder – it’s always prudent to seek professional advice tailored to your personal circumstances before taking financial decisions.
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